BHP share price in focus
BHP Group (formerly BHP Billiton) is a diversified natural resources company founded in 1885 that produces commodities for energy use and manufacturing, and is moving into fertilisers.
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 are a common constituent of an ASX share portfolio. If you own a popular ETF or LIC, or invest with Industry Super, chances are you have some exposure to BHP shares already.
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.
CSL shares
CSL is a global biotechnology company that develops and delivers innovative medicines that save lives, protect public health, and help people with life-threatening medical conditions live full lives.
The company is divided into three main business units: CSL Behring, CSL Seqirus and CSL Vifor. Behring, acquired in 2004, manufactures and distributes blood plasma products. Seqirus was formed by a rebranding of BioCSL and the acquired Novartis flu business (bought in 2015), and makes flu-related products and performs pandemic-related services for Governments. Finally, Vifor makes products for iron deficiency and nephrology (renal/kidney care).
CSL has developed a reputation with Australian investors over many decades as being a reliable company and a consistent dividend payer. Many consider an investment in CSL to be an indirect play on the continuing rise in healthcare costs.
Share price valuation
One way to have a ‘speedy read’ of where the BHP share price is, is to study something like dividend yield through time. Remember, the dividend yield is effectively the ‘cash flow’ to a share holder, but it can fluctuate year-to-year or between payments. Currently, BHP Group Ltd shares have a dividend yield of around 6.26%, which compares to its 5-year average of 6.14%. Put simply, BHP shares are trading above their historical average dividend yield.
Since it is a more mature-style business, the CSL share price is offering a 12-month trailing dividend yield of around 1.20%, which compares to its 5-year average of 1.28%. 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 CSL share price.
