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Should you buy BHP Group shares for its special dividend?

One of the best performing blue chips over the last 12 months has been the BHP Group Ltd (ASX: BHP) share price.

Since this time last year the mining giant’s shares have put on a gain of 11.6% compared to a decline of approximately 8.5% for the benchmark ASX 200.

Neither figure includes dividends. If you included them you would be looking at a total return of just under 17% for BHP and a decline of 4.5% for the index.

But it doesn’t stop there. Later this month BHP shareholders are going to receive yet another dividend. This time in the form of a US$1.02 ($1.45) per share fully franked special dividend which is part of a capital return programme following the divestment of its shale oil assets.

Based on its last close price, this special dividend provides a yield of 4.3%.

The good news is that there’s still time to get hold of it. BHP’s shares will go ex-dividend on January 10 before being paid the dividend on January 30.

Should you buy BHP’s shares for its special dividend?

I think that BHP’s shares and this special dividend would be a great option for income investors right now.

Along with rival Rio Tinto Limited (ASX: RIO), I think their world class and low cost operations have put them in a position to deliver another year of bumper free cash flows in FY 2019 despite the slowing of China’s economic growth.

Which given the strength of their respective balance sheets, could mean that further capital returns are possible this year.

Because of this I see BHP’s shares as a buy and a good way to diversify a portfolio. All in all, I would much rather be holding them than the shares of fellow dividend favourite Telstra Corporation Ltd (ASX: TLS) this year.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. 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 Scott Phillips.

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