If you're looking for exposure to the resources sector, then BHP Group Ltd (ASX: BHP) shares could be the way to do it.
This is because the team at Morgans see plenty of upside for the BHP share price and big dividends in the near future.
What did Morgans say about the BHP share price?
According to a note from this week, the broker has retained its add rating but trimmed its price target on the mining giant's shares slightly to $45.70.
Based on the current BHP share price of $38.62, this implies potential upside of over 18% for investors.
It gets even better, with Morgans forecasting a fully franked dividend of $3.40 per share in FY 2022. This represents a yield of 8.8%, bringing the total return on offer here to approximately 27%.
Why is Morgans bullish?
Morgans notes that BHP has signed a share sale agreement with Woodside Petroleum Limited (ASX: WPL), with the proposal to merge their two petroleum businesses now binding.
This is just one of a number of big moves BHP has made in recent years, which Morgans believes supports the view that Mike Henry was appointed for his vision, not just his operational chops. It notes that BHP has moved decisively to exit coal (ex-BMA) and oil and gas, while pushing ahead with the construction of Jansen (potash).
And while the broker highlights that these are strategic exits from some difficult commodities, the divestments have blunted BHP's growth profile and reduced diversification. As a result, Morgans believes BHP will soon add to its operations through acquisitions.
It commented: "We do not think this is the last move, and expect BHP to continue to move its portfolio to add further base metal growth options. As a base case we expect more acquisitions of development-ready copper/nickel projects (like Norront Resources), while we see more aggressive M&A of existing miners also a realistic scenario."
Overall, the broker sees plenty to be positive about and continues to rate its shares highly.
Morgans concluded: "We see BHP as best placed to take advantage of current varying commodity cycles and maintain our Add recommendation."
