The BHP Group Ltd (ASX: BHP) share price is overcoming broad market weakness and pushing higher on Wednesday.
In afternoon trade, the mining giant's shares are up over 1% to $47.25. This latest gain means the BHP share price is now up almost 33% over the last 12 months.
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Why is the BHP share price pushing higher today?
Today's gain in the BHP share price appears to have been driven by a broker note out of Morgan Stanley.
According to the note, the broker has retained its overweight rating and lifted its price target on the company's shares to $50.70. Based on the current BHP share price, this price target implies potential upside of 7.3% over the next 12 months excluding dividends.
However, if you were to include the fully franked dividend of ~$2.10 per share it expects BHP to pay in FY 2021, this potential return stretches to approximately 11.5%. It is also worth noting that Morgan Stanley is expecting its dividend to increase further in FY 2022 and is forecasting a ~$3.60 per share fully franked payout to shareholders.
Why is Morgan Stanley positive on BHP?
Morgan Stanley is positive on BHP largely due to the sky high iron ore price. It believes this will underpin record second half earnings in FY 2021.
In addition to this, a note out of its London office reveals that Morgan Stanley believes the market is under-appreciating its capital return prospects. Due to its low cost assets, strong free cash flow generation, and oil and gas exposure, the broker sees potential for BHP to reward shareholders handsomely in the future with capital returns.
Outside this, the broker notes that the mining giant is working to offload its thermal coal assets. It feel this could give its ESG credentials a major boost once they have been sold off.
All in all, it feels this makes the BHP share price one to consider at the current level.
