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Should you buy BHP and these ASX blue chip shares?

James Mickleboro
ASX dividend shares

The Australian share market is home to a large number of quality blue chip shares for investors to choose from.

In fact, there are so many it can be hard to decide which ones to buy.

To narrow things down for you, I’ve picked out three blue chip shares which I think are in the buy zone right now. They are as follows:

BHP Group Ltd (ASX: BHP)

Recent weakness in the iron ore price and trade war concerns have weighed heavily on this mining giant’s shares. So much so, they are currently trading almost 13% lower than their 52-week high. I think this could be a buying opportunity for investors that are looking for a little exposure to the resources sector. This is because I believe BHP is well-placed to deliver bumper free cash flows in FY 2020 thanks to its low cost operations and favourable commodity prices. Furthermore, I suspect that the majority of its free cash flow will find its way back to shareholders in the form of dividends, which makes its shares even more attractive given the low interest rate environment we are living in.

CSL Limited (ASX: CSL)

Although it might be best to wait for the market to digest this global biotherapeutics company’s full year results before snapping up shares today, I continue to believe it is one of the best blue chips that Australia has to offer and a great buy and hold option. This is due to the quality of its CSL Behring and Seqirus businesses. I believe both have outstanding long-term growth potential thanks to their high quality product portfolios, potentially lucrative product pipelines, and talented management and research teams. Overall, I believe this has put CSL in a position to continue growing its earnings at a strong rate long into the future.

Wesfarmers Ltd (ASX: WES)

A final blue chip for investors to consider buying is Wesfarmers. I think the conglomerate’s outlook has improved greatly in recent months due to the potential rebound in the housing market. This is because its Bunnings, Kmart, and Target brands all have exposure to the housing market. In addition to this, rising house prices will often lead to improving consumer sentiment and spending, which should again be a big positive for its numerous brands. A final reason to consider an investment is that its shares offer an attractive dividend yield. I estimate that Wesfarmers will pay a FY 2020 dividend of $1.53 per share, which equates to a fully franked 4% dividend yield.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019