BHP share price
BHP Group (formerly BHP Billiton) is a diversified natural resources company producing commodities that was founded in 1885.
BHP’s principal business lines are mineral exploration and production. BHP’s assets, operations and interests are separated into three focus areas: Copper and related minerals (e.g. gold, uranium, silver, zinc, etc.), Iron Ore, and Coal (i.e. metallurgical and energy).
BHP shares are often seen as a reliable dividend paying investment and is a common constituent of an ASX share portfolio. If you own an popular ETF or LIC, or invest with Industry Super, chances are you have exposure.
Since we consider BHP Group Ltd to be a blue chip stock, or a mature business, we like to look at things like return on invested capital (ROIC) and revenue growth as signs of sustainability. In FY23, BHP Group Ltd had an ROIC of 28.10% and revenue has compounded at 22.7% in recent years. Anything over 10% ROIC is pretty strong for a mature-style business, since its cost of capital is likely below that level, so BHP Group Ltd crosses this hurdle.
WES share price
Founded in 1914, Wesfarmers is an Australian conglomerate headquartered in Perth. It mainly has operations across Australia and New Zealand, operating in retail, chemical, fertiliser, industrial and safety products.
It’s easy to think of Wesfarmers like a publicly listed private equity company. It has a long history of buying businesses, benefitting from their cash flows, re-investing in them and then selling them for a more attractive price. A good example of this might be Coles Group, which is bought in 2007 and spun out in 2018. However, by far (over 50%) of the company’s operating profit comes from Bunnings, the #1 hardware and home improvement business in Australia. It bought the remaining 52% of Bunnings that it didn’t own in 1994 for $594 million. Other brands include Kmart, Target, Officeworks, Blackwoods and Priceline Pharmacy.
Wesfarmers has long been considered a leading blue chip stock for the average ASX share portfolio. Wesfarmers has quality assets such as Bunnings, Kmart and Officeworks and pays a consistent dividend to its shareholders.
Share price valuation
One way to have a ‘speedy read’ of where the BHP share price is, is to study something like dividend yield thru time. Remember, the dividend yield is effectively the ‘cash flow’ to a share holder, but it can be influenced by yearly or bi-yearly fluctuations. Currently, BHP Group Ltd shares have a dividend yield of around 5.89%, which compares to its 5-year average of 9.38%. Put simply, BHP shares are trading below their historical average dividend yield.
Since it is a more mature-style business, the WES share price is offering a historical dividend yield of around 2.87%, which compares to its 5-year average of 3.84%. The Rask websites, especially our Rask Education platform, offer free tutorials explaining Discounted Cash Flow (DCF) and Dividend Discount Models (DDM). Both of these models would be a better way to value the WES share price.
