Is the BHP Group Ltd (ASX: BHP) share price now a buy? BHP reported its FY21 result two days ago.
What was in the BHP report?
The company generated an enormous amount of profit.
It showed that its profit from operations soared 80% over the year to US$25.9 billion, with underlying EBITDA (EBITDA explained) rising by 69% to $37.4 billion.
Underlying ‘attributable’ profit increased by 88% to US$17 billion whilst reported attributable profit rose 42% to US$11.3 billion. The lower reported profit reflected a US$5.8 billion impact predominately relating to impairments.
Net operating cashflow grew 73% to US$27.2 billion.
However, the BHP share price fell around 7% yesterday in the first response to the result and other moves by the business.
Other moves
One change the company is making is ending its dual structure where part of the business is in the UK and part of the business is in Australia. It’s going to unify the business in Australia, though some investors believe that disadvantages ASX investors.
BHP has been considering what to do with its oil business. Woodside Petroleum Limited (ASX: WPL) is going to merge with the oil business of BHP to create one of the biggest oil businesses in the world. BHP shareholders will receive Woodside shares to fund the deal.
Could the BHP share price be a buy?
BHP is an interesting business to think about.
Its fossil fuel exposure is a reason that plenty of investors don’t buy it. However, oil is seemingly on the way out and coal probably won’t stick around forever either.
In one of BHP’s announcements this week it revealed it was investing a few billion in potash in Canada. BHP believes potash has a long-term future as a fertiliser.
The resource giant said that it’s targeting the resources of the future, with potash seemingly being one of those materials. Copper and nickel are also two other commodities that are already in the BHP portfolio.
It seems that BHP has a (somewhat) greener, long-term term future. It’ll be interesting to see what it does next considering all the things that Fortescue Metals Group Limited (ASX: FMG) is up to.
Miners can make very good profits, as BHP is showing now. But commodity businesses aren’t buys all the time (or even most of the time). Commodity prices can be very cyclical. The iron ore price is/was very high. It doesn’t make much sense to buy near the top of the cycle.
If I were going to try to buy BHP shares, it would (hopefully) be near the bottom of the iron ore cycle.
But with the oil divestment and potash investment, I’m going to keep a closer eye on the BHP share price now. Commodities are always needed for making stuff in the world, so BHP could turn into an attractive long-term dividend idea at the right price. It has already been around for over a century.
According to Commsec, BHP has a fully franked dividend yield of 6.3% when looking at the 2023 financial year (when iron ore prices are expected to be lower). That’s still a good yield. But for now there are other ASX dividend shares I’m looking at.
