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Why BHP shares can deliver ASX dividends and growth

The BHP Group Ltd (ASX: BHP) share price has struggled to climb higher in 2019 as the US–China trade war has troubled ASX resources companies.

But according to an article in the Australian Financial Review (AFR), BHP’s recent US$400 million (A$593 million) investment could deliver long-term shareholder value.

So that leads to the question: should BHP shares be considered a growth stock or an ASX dividend stock?

What was BHP’s recent investment?

In July 2019, BHP announced a US$400 million investment in its Climate Investment Program to reduce greenhouse gas emissions.

According to the AFR, BHP Chief External Affairs Officer Geoff Healy told investors in London that this investment will help “preserve and create value for BHP”.

The hefty investment is controversial amongst shareholders because it looks to offset the emissions of BHP’s customers.

Some investors instead argue that this should be the responsibility of the customer, rather than BHP, and that it could hurt the company’s share price.

However, management’s view seems to be that growing greenhouse gas emissions could threaten the company’s long-term potential as a major resource extractor.

What does this mean for BHP shares?

At the moment, probably not all that much.

However, if BHP can deliver significant carbon emission offsets through its program, it does stand to benefit as a leading corporate in the climate action fight.

This could be good for business, not just from a regulatory point of view, but also due to strong customer uptake for those looking to invest “ethically” on the ASX.

Should you buy BHP shares for income or growth?

Given BHP shares currently yield 5.39% per annum and the company has a market cap of $170.1 billion, many would argue that BHP is clearly an ASX dividend stock.

However, the BHP share price has more than doubled since the start of 2016 and could be well-placed to deliver similar growth into 2020 and beyond.

With a price-to-earnings ratio of just 14.43x, the BHP share price could be good value at the moment.

This appears especially true given its recent share price drop amid the ongoing US–China trade war.

BHP shares could provide the perfect combination of income and growth as we enter 2020. 

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Motley Fool contributor Kenneth Hall has no position in any of the 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 Scott Phillips.

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