When an investor buys a blue-chip ASX 200 share, chances are they are expecting it to rise in value over time.
We all know that returns on the share market aren't linear. You might have a couple of good years, followed by a poor year of returns. But over time, investors expect their stocks to go up and to the right.
Most of the time, that turns out to be the case. Whether it be Commonwealth Bank of Australia (ASX: CBA), Wesfarmers Ltd (ASX: WES), or JB Hi-Fi Ltd (ASX: JBH), these blue-chip shares have all managed to compound and grow wealth for their investors.
But there are a few prominent blue-chip shares that haven't actually been great long-term performers, at least at first glance.
BHP Group Ltd (ASX: BHP) is one of those.
BHP, or 'The Big Australian' as it is sometimes known, is an ASX veteran. It has been on our stock market for decades, and is a staple holding in many investors' portfolios.
It's not hard to see the appeal. BHP is one of the largest mining companies in the world, and a major source of prosperity in Australia.
So it might come as a surprise to learn that someone who bought BHP shares 17 years ago would be looking at roughly the same value figure in their brokerage account today.
Is blue-chip share BHP an ASX dud?
Yep, today, BHP is going for $38.37 a share at the time of writing, up 0.34% for the day thus far. If one went all the way back to October of 2007, they would find that one could have bought BHP shares for exactly the same price back then.
Check it out for yourself below:
That's 17 years of treading water, highlighting the dangers of investing in a company that is perpetually at the mercy of the global commodities market.
There are a couple of caveats to point out here.
Firstly, it's not like no investor has ever made money from buying and selling this ASX blue-chip share.
As a miner, BHP's share price is more volatile than most. Over the past 17 years, BHP has traded as high as $50 and as low as $13. If one bought and sold this company at the right times, there was plenty of money to be made. Not that this path is easy, of course.
Secondly, although BHP shares are the same value today as they were in October of 2007, dividends do form a major component of its shareholder returns. By my rudimentary calculations, an investor would still have enjoyed a dividend return of roughly 5% per annum (plus franking) since 2007 from holding BHP stock, despite this ASX blue-chip share holding the same price.
Thirdly, BHP shareholders did benefit from the 2015 spin-off of South32 Ltd (ASX: S32). An investor who bought this ASX blue-chip share in 2007 would own the same value of BHP shares today, but they would also own a few South32 shares. These shares have appreciated by around 31% since their 2015 listing, and have been paying their own dividends ever since as well.
Foolish Takeaway
Looking at BHP shares today, we are reminded that returns are never guaranteed on the stock market. In my view, the best ASX shares to buy, blue chip or not, are the ones that can harness the power of compounding most effectively. Miners often struggle in this regard, since their products can only ever be sold at market prices.
Investors can, and do, make money with shares like BHP. But as set-and-forget, bottom-drawer investments? That's harder to justify on these numbers.
