Why the BHP Billiton Limited share price has been hammered today

Credit: Lucas Walters

One of the worst performers on the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) today has been the BHP Billiton Limited (ASX: BHP) share price.

In afternoon trade the mining giant’s share price is lower by almost 4.5% to $24.14.

Why has the BHP Billiton share price tumbled?

Firstly, one key reason why BHP Billiton’s shares are lower today is the fact that it has gone ex-dividend. This means that its interim dividend belongs to investors which owned its shares at yesterday’s market close.

Generally a share price will fall on the day its goes ex-dividend. This allows the buyer of the shares to purchase them at a lower price, compensating them for the fact that they will not receive the benefit of the dividend payment.

BHP’s interim dividend is approximately 52 cents fully franked, roughly equating to a yield of 2% on yesterday’s close price.

Whilst its ex-dividend status explains why its shares dropped 2%, it doesn’t explain the full decline.

The rest of the decline can be attributed to a broad sell-off in the energy and materials sectors. Both sectors are down around 2% today thanks partly to a slump in oil and iron ore prices.

As well as BHP, this has dragged the Fortescue Metals Group Limited (ASX: FMG) share price and the Santos Ltd (ASX: STO) share price down by around 3% today.

Should you buy the dip?

As I’m reasonably bearish on both oil and iron ore I wouldn’t be in a rush to invest in BHP Billiton even after this decline.

Instead, I would suggest investors look at the healthcare and information technology sectors for investment ideas. At present I believe there are some high quality companies trading at great prices.

Alternatively, I think these three growth shares would be a far better investment than BHP at this point in time. Each looks set for a strong 2017, which I believe could mean market-beating returns.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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