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2 ASX shares worth watching: BHP and RIO

The BHP Group Ltd (ASX:BHP) share price has decreased 19.1% since the start of 2024. It's probably worth asking, 'is the BHP share price good value?'
The BHP Group Ltd (ASX:BHP) share price has decreased 19.1% since the start of 2024. Meanwhile, the Rio Tinto Ltd (ASX:RIO) share price is 14.1% away from its 52-week high.

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.

RIO shares

Founded in 1873, Rio Tinto is today the world’s second largest metal and mining company, behind only BHP Group. Rio Tinto is engaged in minerals and metals exploration, development, production and processing.

Rio can be divided into four core business units: Aluminium, Copper & Diamonds, Energy & Minerals and Iron Ore.

Of the four units, iron ore (the primary component in steel manufacturing) is by far the largest export. It’s no surprise then that the performance of the company can be strongly affected by the price of iron ore and other key commodities, making earnings somewhat volatile.

BHP share price valuation

We would consider BHP to be a ‘mature’ or ‘blue-chip’ business, so some of the metrics that could be worth considering include the debt/equity ratio, average yield, and return on equity, or ROE. These measures give us a sense of the company’s debt levels, their ability to generate returns from their assets, and their ability to consistently return profits to shareholders.

For FY24, BHP Group Ltd reported a debt/equity ratio of 45.3%, meaning the company has more equity than debt.

Over the last 5 years, BHP has delivered an average dividend yield of 6.9% per year. This is important to note if you’re looking for income from your investments.

Finally, in FY24, BHP reported an ROE of 19.7%. For a mature business you generally want to see an ROE of more than 10%, so BHP clears this hurdle.

In FY24, Rio Tinto Ltd reported a debt/equity ratio of 25.0%, meaning the company has more equity than debt.

As for dividends, since 2019 RIO has achieved an average dividend yield of 6.4% per year, and in FY24 reported an ROE of 18.2%

It’s important to keep in mind that these are only a small selection of metrics and don’t give us enough information to value the business or make an investment decision. To learn more about valuation, check out one of our free online investing courses.

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Chief Investment Officer Owen Rask has just released his brand new passive income report. Owen has outlined 10 of his favourite ETFs and shares to watch, his rules for passive income investing, why he would buy ETFs before LICs and more.

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5%+ in passive income

Owen Rask’s investing report available

With bond ETFs like ASX:IAF and the S&P 500 riding high, now could be one of the best times to start earning passive income from a portfolio of shares and ETFs.

In this free analyst report, our Chief Investment Officer, Owen Rask, names 10 ASX stocks and ETFs to watch.

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