The BHP Group Ltd (ASX: BHP) share price is down 1.13% in early trade to $37.055 on this final day of October.
Shares in the iron ore giant rounded off September trading for $38.52 per share.
That puts the BHP share price down 3.8% in October, which compares to a 5.9% monthly gain posted by the S&P/ASX 200 Index (ASX: XJO).
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Why did the BHP share price underperform in October?
Much of the headwinds the miner faced over the past month came from a sliding iron ore price.
BHP derives roughly half its revenue from iron ore, and the industrial metal sank to a two-year low last week and dipped again over the weekend.
That weakness is primarily driven by falling demand from China. The Middle Kingdom is struggling with renewed lockdowns in its COVID-zero strategy, as its steel-hungry real estate market remains in the doldrums.
As for iron ore, on 1 October it was trading for US$99 per tonne. Today, that same tonne is trading for US$82, down 11% over the month.
Remember, it was only back in April this year when the steel-making metal was fetching US$161 per tonne. At the time, the BHP share price was trading near record highs of $47.34.
Time to pounce?
With the BHP share price3.8% lower in October and down 22% since its April highs, is it time to snap up some shares?
As you'd expect, much of the outlook depends on the trajectory of the iron ore price.
The government offered a fairly gloomy forecast for iron ore prices in last week's federal budget. Government analysts believe the metal will slide to US$55 per tonne (Free on Board (FOB) Australia) by the end of Q1 2023.
In its Economic Insights report, however, Commonwealth Bank of Australia (ASX: CBA) had a more optimistic take.
"The Budget's iron ore price forecast is lower than our outlook through the outlook period," the bank noted.
According to the report:
We broadly expect iron ore prices to bottom in Q1 2023 as China's COVID-zero policy continues to weigh on demand. A shift away from China's COVID-zero by the end of March 2023 should see iron ore prices lift in the following quarters.
Portfolio manager of the Bennelong Kardinia Absolute Return Fund, Kristiaan Rehder, also sounded a bullish note on the BHP share price outlook in our recent interview.
BHP paid an enormous dividend in its most recent reporting season. It declared a final, fully franked dividend of about US$9 billion. And that's done very well for us.
"We still hold BHP now, and we are favourably disposed to resources generally," he said. "We think there is likely to be ongoing demand for the commodities that BHP produces."
Rehder continued:
We also think it's likely that at some point over the next six months the Chinese economy will be stimulated. Due to the COVID restrictions that are currently in place and the slowing economy that's being experienced, there's a reasonable chance that stimulus will be used to support the economy. And we think BHP will be well positioned for that.
Topping that off, Rehder added, "BHP paid an enormous dividend in its most recent reporting season. It declared a final, fully franked dividend of about US$9 billion."
That's important to keep in mind when looking at the share price fall as well, since a company's shares tend to drop roughly in line with the value of its dividend payouts.
BHP share price longer-term
Taking a longer-term view, the BHP share price is up 34% over the past five years. That compares to a 15% gain posted by the ASX 200.
