The BHP Group Ltd (ASX: BHP) share price had a negative month for September 2023, going backwards by 1.3%. That compares to the S&P/ASX 200 Index (ASX: XJO) falling by 3.5%. While BHP fell, the ASX share market declined even more.
For the wider market, investors seem to be worried about interest rates potentially staying higher for longer. If interest rates go higher, or stay high for longer than expected, that is meant to push down on valuations.
While BHP is exposed to this, other factors may have had an even bigger influence.
Dividend
During September, BHP shares went ex-dividend. That means investors wanting to buy shares are no longer entitled to the upcoming dividend. In theory, it reduces the short-term attractiveness of the investment after the ex-dividend date because it means buyers of shares are missing out on that dividend amount, which has a real cash value.
The business paid A$1.25 per share on 28 September 2023 and went ex-dividend on 7 September 2023.
Investors will need to wait another six months until the next half-year dividend is sent to shareholders.
Iron ore price
An important element of investors' thoughts about BHP shares is how much revenue it gets for its production.
The business can try to be as operationally efficient and productive as possible, but the price per tonne is key for margins and overall profitability.
In FY23, it achieved an average realised price of US$92.54 per wet metric tonne (wmt). According to Trading Economics, the iron ore price spent some of September above US$120 per tonne and all of the month above US$115 per tonne.
This gave the business a strong finish to the quarter ending 30 September 2023 and may be enabling BHP to generate strong monthly profit and cash flow.
There is a lot of FY24 to go, but if the iron ore price were to remain stronger than expected, it could mean better earnings and dividends than projected.
FY24 estimates
According to Commsec, the business could generate earnings per share (EPS) of $3.84 in FY24 and pay an annual dividend per share of $2.13.
If those projections turn out to be accurate, it would mean that the current BHP share price is valued at 11.5 times FY25's estimates with a possible grossed-up dividend yield of 6.9%.
