What are brokers saying about BHP shares following the miner's quarterly results?

Analysts have crunched the numbers.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

BHP Group Ltd (ASX: BHP) shares have garnered significant attention following the miner's recent quarterly results.

With a share price of $44.75 in late Friday trading, investors are no doubt keen to know if BHP shares present a good buying opportunity. Let's dive into what the brokers are saying about the mining giant.

a man in a high visibility vest and hard hat holds a thumbs up at a mine site with heavy equipment in the background.

Image source: Getty Images

Are BHP shares good value?

According to broker Goldman Sachs, BHP shares are currently trading at an attractive level. The investment bank has a buy rating with a $49/share price target on the company over the next 12 months, a potential upside of 9.5%. For a $10,000 investment, this could mean growth to around $10,950 if the forecast proves accurate.

Then, there's the miner's dividend potential.

BHP is renowned for its generous dividends. With a trailing dividend yield currently at 5.08%, it remains a strong choice for income-focused investors.

According to my colleague James last month, consensus estimates are for BHP to pay fully franked dividends of $2.30 per share in FY 2024. This translates to a dividend yield of around 5.1%, adding $510 in dividends to a $10,000 investment over the next 12 months.

What are analysts saying?

Goldman Sachs notes that BHP is trading at approximately 6x its next 12-month projected EBITDA, slightly above the 5.5x multiple of rival mining giant Rio Tinto Ltd (ASX: RIO).

In my opinion, this premium is supported by BHP's strong operating margins and presence, particularly in the Pilbara iron ore region. According to the OECD, the Pilbara region contributed 3.4% of Australia's gross domestic product (GDP) in 2021.

BHP also announced last year its plans to invest $4 billion in the Pilbara region to develop c.550MW of wind, solar and battery storage to reduce operating costs.

Goldman also justified the premium by highlighting BHP's potential for growing copper production in Chile and South Australia.

Despite some concerns about limited upside following recent gains, brokers still see value in BHP shares. In April, Morgans placed an add rating with a $48.30 price target, implying a potential upside of 7.9%.

Similarly, Citi rates BHP as a buy with a $48.00 price target, suggesting a total return of more than 10% when including dividends.

Goldman Sachs maintains its buy rating with a $49.00 price target, as mentioned earlier.

Passive income from BHP shares

BHP shares are a popular choice for passive income investors. Let's run the numbers. Assuming you purchase 100 shares at $44.75, you would invest $4,475 of your hard-earned capital.

Goldman Sachs forecasts fully franked dividends of US$1.45 (A$2.20) per share for FY 2024, resulting in A$220 in passive income. For FY 2025, the expected dividends of US$1.26 (A$1.97) per share would yield A$197. Over the next few years, dividends are projected to slightly decrease but still provide solid returns, as per Goldman's estimates:

  • FY 2026: US$1.22 (A$1.85) per share, yielding A$185
  • FY 2027: US$1.12 (A$1.70) per share, yielding A$170
  • FY 2028: US$1.07 (A$1.62) per share, yielding A$162

Note: All AUD figures are quoted at the exchange rate of $1 AUD = $0.66 USD at the time of writing.

Foolish takeaway

BHP's recent quarterly results have prompted positive feedback from brokers, highlighting its attractive valuation, strong dividend yield, and growth potential in copper production.

With a current share price of $44.75 and a trailing dividend yield of 5.08%, BHP shares may be an opportunity for both growth and passive income investors. The mining giant certainly appears to have the backing of our top brokers.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Broker Notes

Teen standing in a city street smiling and throwing sparkling gold glitter into the air.
Broker Notes

9 ASX shares just upgraded by the experts

Several ASX 200 gold miners are in the mix.

Read more »

A guys points his fingers down.
Broker Notes

6 ASX shares downgraded by brokers this week

Brokers cut their ratings on Elders, Charter Hall Retail REIT, Sims, and other stocks this week. 

Read more »

A man clenches his fists in excitement as gold coins fall from the sky.
Broker Notes

Morgans says these ASX shares could return 48% to 95%

The broker is recommending these shares to investors this week.

Read more »

Farmer holding grains in his hands.
Broker Notes

Why this broker thinks GrainCorp shares are a buy after yesterday's fall

This broker is expecting a rebound.

Read more »

Doctor with stethoscope holding a tablet and smiling.
Healthcare Shares

ASX healthcare shares are 39% higher since June. Are you missing out?

Healthcare stocks endured a long slump before the sector pivoted three months ago.

Read more »

Six smiling office colleagues stand in a row and look at the camera.
Broker Notes

9 ASX 200 shares earning strengthened buy ratings this week

Brokers retained a positive view on Santos, Goodman, AMP, Telstra, and other shares this week. 

Read more »

A middle-aged man working from home looks at his mobile phone with a laptop open on the table in front of him.
Broker Notes

Buy, hold, sell: Select Harvests, Seek, SKS Technologies shares

Experts reveal their ratings on 3 ASX shares in the agriculture, communications, and tech segments. 

Read more »

A young man working from home sits at his home office desk holding a cup of tea and looking out the window.
Broker Notes

Buy, hold, sell: Generation Development, Fletcher Building, Saluda Medical shares

We review 3 fresh buy, hold, and sell calls from expert market analysts. 

Read more »