Is the BHP Group Ltd (ASX: BHP) share price worth looking at for income?
It’s an interesting question because of the fact that BHP is a commodity business.
Commodities are typically volatile through economic cycles. There are periods of time where iron demand is very strong and sometimes there is a lot less demand.
Resource businesses have to take the price they can get for their commodities. You can’t get away from the supply and demand relationship.
So if the commodity price is unstable, then it’s fair to think that profit would be unstable too.
If the profit is volatile then the dividend may not be very stable either.
So is BHP a good income share at this share price?
BHP is currently paying out very strong dividends. It’s benefiting from a very high iron ore price. But there are predictions that the iron ore price, which is currently driving the current BHP profit, is going to drop down a bit.
I think it’s probably true that Chinese demand isn’t going to stay this strong forever. However, one of the main advantages of BHP is that it’s diversified across a few different resources. The current copper price seems supportive for the BHP share profit and share price. There’s also a chance that the iron ore price stays higher for longer than expected. Oil and coal are also doing better than they were during the worst of 2020.
At the current BHP share price, it has a fully franked dividend yield of 7.75% for FY21 according to Commsec. The fully franked yield for FY22 is expected to be just under 7.5%.
Those aren’t bad yields at all, I just don’t think that the top of the iron ore cycle is the best time to buy shares of a predominantly iron ore miner.
Other ASX dividend shares might be better ideas to consider for more consistent dividend income
