Is the BHP Group Ltd (ASX: BHP) share price a buy today? Good question!
BHP has been one of the best S&P/ASX 200 Index (ASX: XJO) blue chip shares to own in recent years. It even fared relatively well during the coronavirus-induced market crash last year, roughly recovering all of its March 2020 losses by August. In contrast, it took until 2021 for most of the ASX banks to do the same. And over the past 5 years, BHP shares have gained more than 132% in value. And that’s not even including dividend returns.
As it stands today (at the time of writing) at $48.36 a share, BHP is sitting pretty close to its 52-week (and all-time) high of $50.93. Even at this relatively high share price, BHP still offers a trailing dividend yield of 4.3% (or 6.13% grossed-up with BHP’s full franking).
So are BHP shares worth a buy today?
Before we ask that question, let’s have a think about what is driving these share price gains. Well, it mostly comes down to commodity prices. As it stands today, BHP’s largest operation is iron ore. And as it happens, the price of iron ore is currently near all-time highs. At the time of writing, it’s trading for US$197 a tonne. Back in 2016, it went under US$40 a tonne at one point.
But iron ore isn’t BHP’s only game. It also has significant operations in coal, oil and copper. All 3 of these commodities have also been enjoying a pricing boom of late too. Brent crude is now well back above US$60 a barrel, and coal is above US$85 a tonne. And copper has never been priced so high. It’s currently at almost US$450 a pound, more than double what it was this time last year.
So no wonder investors are liking what they see with BHP right now.
Is the BHP share price a buy today?
According to CommSec, investment banker and broker Goldman Sachs has rated BHP shares a ‘buy’, with a pricing target of $54.20 a share upheld last week. Goldman sees further upside for BHP shares due to a positive outlook on future coal, oil and copper prices going forward. Goldman estimates we will see a 50% rise in BHP’s earnings before interest, tax, depreciation and amortisation (EBITDA), and a 10% free cash flow yield in FY2021.