The BHP Group Ltd (ASX: BHP) share price could be an attractive dividend opportunity.
BHP is one of the largest resource businesses in the world. It is spread across a number of different resources, providing commodity diversification.
Currently, the business has exposure to iron ore, oil, coal, copper and nickel. The plan is to expand with potash as well.
Dividend expectations
BHP is one of the biggest dividend payers on the ASX.
Many analysts believe that it is going to be another year of big dividend payments in FY22 from the resources giant.
For example, the broker Macquarie Group Ltd (ASX: MQG) thinks that BHP is going to pay a dividend of $3.76 per share in FY22. At the current BHP share price, that translates into a projected grossed-up dividend yield of 14.7%.
Another broker, Morgans, has an even bigger estimate for the dividend in FY22 of $3.95 per share. That would be a grossed-up dividend yield of 15.5%.
A commodity company's dividend is usually dependent on the profit it makes. The profit is generated from the price of the commodity and how much it produces (less costs, of course).
BHP recently told investors about the quarter for the three months to 30 September 2021.
FY22 first quarter
Iron ore generated the lion's share of the profit in FY21. The amount of iron ore produced in the first quarter of FY22 was 63.3mt, which was down 4% year on year and down 3% quarter on quarter.
BHP explained that its Western Australian Iron Ore (WAIO) division production mainly reflected higher planned maintenance during the quarter, including major maintenance of car dumper one and temporary rail labour shortages.
Turning to the other resources performance for the quarter on quarter numbers, petroleum production increased 3% to 27.5 MMboe, copper production was down 9% to 376.5kt, metallurgical coal production was down 9% to 8.9mt, energy coal production was up 17% to 4.2mt and nickel production was down 20% to 17.8kt.
Potash expansion
Another area that BHP Is looking to grow in is future-facing resources.
Potash is one of those resources that could help agriculture produce more, with lower emissions. It could be a bigger influence on the BHP share price over time.
BHP has sanctioned the Jansen project in Canada and announced the approval of capital expenditure of US$5.7 billion.
The business thinks that Jansen will be able to achieve an underlying earnings before interest, tax, depreciation and amortisation (EBITDA) margin of 70% at the Jansen project. The operating cost is expected to be around US$100 per tonne, which management said was at the bottom of the cost curve.
BHP also said that Jansen could provide up to 100 years of reliable supply in a stable jurisdiction.
Is the BHP share price good value?
Some brokers think so.
BHP shares are currently rated as a buy by analysts at Macquarie with a price target of $52. Macquarie thinks that BHP shares are priced at 8x FY22's estimated earnings.
Another broker, Morgans, also says that BHP shares are a buy, with a price target of $46.05.
