The BHP Group Ltd (ASX: BHP) share price has come off the boil since the highs of July. BHP shares closed at $35.39 this afternoon – a good 16% off the 52-week high of $42.33 the 'Big Australian' hit mid-winter.
So does this make BHP a screaming buy for those massive, iron-ore fuelled dividends shareholders have had raining into their bank accounts this year? Lets take a look.
What's happened with the BHP share price this year?
It's been a bumpy ride for BHP shareholders during 2019 so far. BHP shares started the year at $33.68, but a massive surge in iron ore prices in the first few months of the year saw BHP shares run up an extraordinary 25% by July. This surge was ignited by a mine dam owned by Brazilian-owned miner Vale SA collapsing, shuttering production at the mine and causing a supply squeeze.
However, iron prices have subsequently cooled over last few months and this (together with some likely profit taking) has seen BHP shares settle at the levels we see today.
Is BHP a buy for dividends today?
As a low-cost resources stock, BHP has the ability to pay higher dividends when commodity prices are historically high (like for the majority of 2019 so far). This year so far, BHP has given shareholders three dividend cheques – an interim dividend of 78 cents per share, a final dividend of $1.14 per share and a special dividend of $1.41 per share. This means that BHP shareholders have received a dividend yield of 9.41% this year based on today's share price.
Whilst this is a huge yield (and one undoubtably welcomed by shareholders), at the end of the day, BHP is a resources company and the dividends it can pay are almost entirely dependent on the prices of the commodities it produces. BHP investors can indeed expect juicy dividends when times are good, but if iron ore prices collapse or indeed just enter a period of stagnation – the dividends will quickly dry up.
Foolish takeaway
Whilst I think BHP is a high-quality miner and a great stock to hold for dividend investors, the one thing that BHP cannot deliver is consistency. Any income investor should expect feast and famine from BHP shares – and if you're ok with that, BHP might be a great stock to buy today!
