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Why the BHP share price is sinking 5% lower on Thursday

One major drag on the ASX 200 on Thursday has been the BHP Group Ltd (ASX: BHP) share price.

At the time of writing the mining giant’s shares are down almost 5% to $32.66.

Why is the BHP share price sinking lower today?

The good news is that this sizeable drop has little to do with demand for commodities or expectations for the year ahead but is almost entirely attributable to BHP’s shares trading ex-dividend this morning for its special dividend.

Late last year BHP completed the sale of its interests in the Eagle Ford, Haynesville and Permian Onshore U.S. oil and gas assets to BP America Production Company for a gross consideration of US$10.5 billion.

Following its completion, the company announced plans to return US$10.4 billion to its shareholders through the combination of an off-market buy-back and a special dividend.

The US$5.2 billion off-market buy-back was completed in late December, allowing the BHP board to declare a fully franked special dividend of US$1.02 ($1.43) per share.

Its shares went ex-dividend for this dividend this morning and eligible shareholders can now look forward to receiving a pay check on January 30.

Should you buy the dip?

I think both BHP and Rio Tinto Limited (ASX: RIO) are great options for investors looking to diversify their portfolios with a little exposure to the resources sector.

Especially given news that the U.S. and China are making progress with their trade talks.

If a trade war is avoided then I expect global economic growth to be robust, leading to solid demand for the key commodities they produce.

Given how profitable their low cost operations are, this should put both miners in a position to reward shareholders handsomely with dividends this year. So much so, I would rather buy BHP and Rio Tinto shares than fellow income stock Telstra Corporation Ltd (ASX: TLS).

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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