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The performance of ASX stocks can provide valuable insights for investors looking to optimize their portfolios. Notably, BHP Group Ltd has seen its share price decline by 18.6% since the beginning of 2024, while Xero Ltd is just 2.3% shy of its 52-week high. This article explores why both BHP and XRO shares might deserve a spot on watchlists.
BHP Group Ltd (ASX:BHP)
BHP Group, originally founded as BHP Billiton in 1885, stands as a diversified natural resources company that produces commodities essential for energy and manufacturing, with a growing focus on fertilizers. The company's operations are categorized into three main sectors: copper and related minerals (including gold, uranium, silver, and zinc), iron ore, and coal (both metallurgical and energy).
BHP shares are often regarded as a dependable dividend-paying investment and frequently feature in many ASX share portfolios. Investors in popular exchange-traded funds (ETFs) or industry superannuation funds likely have some exposure to BHP.
As a blue-chip stock, BHP is evaluated based on metrics such as return on invested capital (ROIC) and revenue growth. In FY23, BHP recorded an impressive ROIC of 30.30%, indicating a robust return for a mature business. However, revenue has seen a slight decline, compounding at -0.7% in recent years. Despite this, a ROIC exceeding 10% signifies strong performance, especially considering the company’s cost of capital.
Currently, BHP Group Ltd offers a dividend yield of approximately 5.32%, which aligns closely with its five-year average of 5.36%. This suggests that BHP shares are trading below their historical average dividend yield, making them potentially attractive for income-focused investors.
Xero Ltd (ASX:XRO)
Founded in 2006 in Wellington, New Zealand, Xero Ltd has become a leader in cloud-based accounting software. The company, established by Rod Drury, employs over 3,000 individuals and supports millions of subscribers in managing their accounting and tax obligations globally.
Xero’s platform, which provides “beautiful accounting software,” is designed primarily for accountants and bookkeepers to enhance their services for small business customers. This software enables small business owners and their advisors to access real-time financial data from any device, streamlining the accounting process.
With its current share price nearly reaching a 52-week high, Xero reflects strong market confidence and growth potential in the cloud accounting sector.
The performance of BHP Group Ltd and Xero Ltd provides compelling narratives for investors. BHP’s reliable dividend yield and strong ROIC make it a staple in many portfolios, while Xero’s growth trajectory in the cloud accounting space positions it as a significant player in the market. Monitoring these stocks could yield valuable insights for investment strategies moving forward.
