The largest ASX mining share, BHP Group Ltd (ASX: BHP), has several positives worth considering.
I believe that certain major ASX shares, such as Commonwealth Bank of Australia (ASX: CBA), may have run a bit too hard and now they look overvalued.
However, when it comes to BHP, I think the ASX mining share has some major pleasing characteristics.
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Solid dividend potential
ASX mining shares typically trade on a lower price-earnings (P/E) ratio than some other sectors. As a result, miners can provide a higher dividend yield than certain industries.
According to a forecast by UBS, BHP could pay an annual dividend per share of US 75 cents in FY26 and US 99 cents in FY27. That translates into forward grossed-up dividend yields, including franking credits, of 4.3% and 5.7%, respectively. UBS predicts the business could pay an annual dividend per share of US$1.27 in FY29.
These predictions are based on certain assumptions for commodity prices, but it's quite possible that the iron ore price could perform better than expected.
Copper exposure
Of all of the commodities that BHP shares provide exposure to, I'm most excited about the copper division.
Copper is an incredibly important resource used for a variety of purposes, including construction, power grids, cars, aircraft, trains, refrigerators, TVs, air conditioners, smartphones, and plenty more. Interestingly, according to BHP, electric vehicles use four times as much copper as petrol-based cars.
While BHP believes copper demand will likely double over the next 30 years, there may be grade (quality) declines at existing copper mines, and it's becoming trickier to find high-quality new copper deposits.
BHP has current/proposed copper mines in South Australia, Chile, Peru, and Arizona.
Over time, I think the copper division will become increasingly important for BHP's overall earnings.
Potential for commodity prices to rebound?
BHP is fairly reliant on commodity prices for how much profit it can make in the short term.
We don't know what the iron ore, copper, potash, and so on prices will do. But if the US tariff situation can be resolved satisfactorily for China, then the iron ore price could perform better than expected. If that happens, the business could positively surprise investors.
But, if the US tariffs start causing economic pain, China could launch financial stimulus to boost its economy, and this could increase demand for commodity prices (like iron ore), which could also help BHP's profit.
The BHP share price is down 17% from 30 September 2024, so the market isn't expecting too much from the ASX mining share.
Overall, I think there's a chance for BHP shares to be a dark horse in producing good returns.
