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Shareholder Value Greater than Ever By TipRanks


© Reuters. BHP Group: Shareholder Value Greater than Ever

BHP Group (NYSE:) is a diversified natural resources company.

The company engages in exploration, development and production of oil, gas and mining various metals, as well as coal and other minerals. Bullish. (See BHP stock charts on TipRanks)

Value Drivers

BHP reported strong H2 results in August. Full-year highlights were released by the company, which showed a 69% EBITDA growth, a 11% higher EBIT Margin, a 139.7% increase in free liquidity flow and a 66% decrease in net debt.

Looking forward, the company is expected to take advantage of further surges in and oil prices. BHP expects to achieve full mining production due to its Spencer copper mine expansion, expected to yield 300,000 tonnes per year.

Sensible corporate restructuring will be a key factor in operational efficiency. BHP plans to merge its parent companies, resulting in improved governance and internal processes. Investors will also see more timely corporate events and simpler voting structures.

The global short-term supply shortage is the last and greatest value driver. In the upcoming quarters, rising prices are likely to facilitate stronger earnings and result in a special dividend payment.

Shareholder Compensation

BHP has a dividend yield of 10.1% with an operating earnings yield (20.6%) exceeding its five-year average of 12%. If the company can sustain these ratios, along with its net income margin of 18.5%, investors could undoubtedly benefit from an even higher yield moving forward.

BHP also holds cash from operations of $27.2 billion on its balance sheet, leaving it with plenty of dry powder to reward shareholders in the form of share repurchases.

Wall Street’s Take

Wall Street thinks BHP group is a Strong Buy, based on three unanimous Buy ratings. BHP has a price target average of $42.30, which implies a potential downside risk of 23.5%

BHP’s current earnings can be sustained due to the lack of commodity supplies. BHP should benefit dearly from oil & iron ore prices. The company’s decline in debt and the increase in its free cash flow show that shareholders value is growing.

Disclosure: Steve Gray Booyens had no position at the time this article was published.

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