BHP Group Ltd (ASX: BHP) shares have been having a tough time of late.
Falling iron ore prices have weighed heavily on sentiment and dragged the miner's shares all the way down to a fresh 52-week low last week.
While that is disappointing, it could have created a buying opportunity for investors according to analysts.
Let's see what could happen if you were to invest $5,000 into the the Big Australian's shares when the market reopens.
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$5,000 invested in BHP shares
The BHP share price ended the week at $40.01. This means that a $5,000 investment (and an extra $1.25) would see you pick up 125 shares in Australia's largest miner.
What could these shares be worth in a year? Let's see what analysts are saying is possible over the next 12 months.
One of the most bullish brokers out there is Goldman Sachs. It currently has a buy rating and $48.40 price target on the miner's shares.
This means that if they were to rise to that level, your 125 units would have a market value of $6,050. That's a return on investment of over $1,000. Not bad!
But your returns shouldn't stop there. That's because BHP is among the biggest dividend payers on the Australian share market. Each year, it returns billions of dollars to its lucky shareholders.
The good news is that Goldman Sachs expects this to remain the case in FY 2025. It is forecasting a fully franked 123 US cents per share dividend. At current exchange rates, this equates to 185.4 Australian cents.
This represents a very attractive 4.6% dividend yield and would mean dividend income of $231.75 from your 125 BHP shares.
This brings the grand total to $6,281.75, which is a total return of approximately $1,280 or 25.6% on a $5,000 investment.
Why is the broker bullish?
Goldman believes that BHP shares have an attractive valuation. And while they trade at a premium to rival Rio Tinto Ltd (ASX: RIO), the broker believes this is justified. It said:
Attractive valuation, but at a premium to RIO: BHP is currently trading at ~6.0x NTM EBITDA (25-yr average EV/EBITDA of 6.6x), a slight premium to RIO on ~5.5x; and at 0.9xNAV vs RIO at 0.8x NAV. Over the last 10 years, BHP has traded at a ~0.5x premium to global mining peers. We believe this premium can be partly maintained due to ongoing superior margins and operating performance (particularly in Pilbara iron ore where BHP maintains superior FCF/t vs. peers).
