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Why is the BHP share price sliding today?

Posted: 25 May 2022 12:08 pm
News
BHP-shares-25May_1800x1000_Finder

Shares in the global miner have climbed 25% over the last 6 months, but are down in today's trading.

Mining giant BHP (ASX: BHP) is the worst performing of the big miners on Wednesday, with the stock sliding nearly 10% in early trading.

At the time of writing, BHP shares were down 9.4% to $43.31 even as shares of rivals Rio Tinto (ASX: RIO) and Fortescue Metals Group (ASX: FMG) were up 1.7% and 0.6% respectively.

What is happening to the BHP stock price?

Fortunately, the sudden slide in BHP shares has nothing to do with the iron ore price, which is largely stable, or any guidance by the company. In fact, today's drop is related to the company's landmark sale of its petroleum business to Woodside (ASX: WPL) that was announced last year.

Woodside shareholders last week voted in favour of merging the Big Australian's petroleum assets with their own in a deal that will transform Woodside into a top 10 global energy producer with over 2 billion barrels of reserves and annual earnings of nearly US$5 billion.

Under the terms of the deal, which will take effect from 1 June, BHP shareholders will retain a stake in the combined entity and are being issued 1 new Woodside share for every 5.534 BHP shares they own. BHP is distributing these Woodside shares in the form of an "in-specie dividend".

Well, the BHP shares are going ex-dividend today.

In simple terms, that means today is the record date for distributing Woodside shares to eligible shareholders. Typically, the share price drops by the value of the dividend paid to reflect the fact that new shareholders are not entitled to that payment.

Strong payouts

The combination of BHP's petroleum assets, worth around $27 billion, has propelled Woodside to a global energy giant status, but its stock is largely stable on Wednesday, simply because it has issued an equivalent number of new shares to BHP investors.

The stock was trading at $28.96, down just 0.1%.

Meanwhile, BHP shareholders are continuing to count their gains as the stock's fundamentals remain quite attractive.

BHP shares currently deliver an enormous dividend yield of more than 8%, thanks to its windfall profits over the last 2 reporting periods.

Meanwhile, the stock is also benefiting from the recent end to its dual-listing in London, which has significantly boosted its weightage on the key ASX indices. The "Big Australian" now accounts for more than 11% of the entire weight of the ASX 200, making it the top stock on the Australian market.

The rapid turnaround in the iron ore price has also led to most analysts revising their outlook on all major mining stocks, including BHP. The market now broadly expects the ore price to stay above US$100 a tonne at least until mid-2023, signalling continued high profits for the Big Three miners.

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Considering buying BHP shares?

If you are keen to buy shares in BHP, Rio Tinto or Fortescue Metals, you can invest through an online share trading platform.

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Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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