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Why has the BHP share price slumped today?


Shares in mining giant BHP have climbed 19% in the last 12 months.

Shares in the world’s biggest miner BHP (ASX: BHP) are among the top losers on the ASX boards on Thursday. Shares in the company were down nearly 7% at $41.92 at the time of writing.

What is weighing down the BHP stock price?

A large part of today’s decline in BHP shares is likely on account of the stock going ex-dividend on Thursday.

In simple terms, that means today is the record date for paying the final dividend that the company declared at its results last month. Typically, the share price drops by the amount of the dividend paid to reflect the fact that new shareholders are not entitled to that payment.

BHP declared a record full year net profit of US$11.3 billion (AUD$15.5 billion) last month, thanks to a surge in iron ore prices during the second half of the financial year. That allowed the company to pay a hefty US$2 (AUD$2.70) a share final dividend, totalling US$10.1 billion.

As indicated above, most of today’s decline reflects this dividend.

Iron ore slide

Beyond the immediate trigger of the stock going ex-dividend, investor sentiment in BHP has taken a hit in the last couple of weeks, largely on account of the iron ore price.

Like its mining peers, the jump in BHP’s profits came on the back of iron ore prices surging to a high of US$237 a tonne in May, and staying above US$200 a tonne for months.

But that strong run has now come to an end, with iron ore prices sliding more than 40% in the last few weeks, largely over concerns of a resurgence of COVID-19 cases in China and also the Asian nation’s decision to lower carbon emissions by curbing manufacturing, including that of steel.

Overnight, spot prices of the key steel-making ingredient slumped by another 5.9% to US$143.55 a tonne.

Analysts believe prices could fall further, to around US$120 a tonne, over the coming months. This will no doubt reflect in BHP’s profits over the next reporting period. It is also likely prompting traders to book profits from the recent run up in the stock.

Considering buying BHP shares?

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