If you're an income investor then the BHP Group Ltd (ASX: BHP) dividend has no doubt caught your eye in recent times.
Thanks to booming iron ore prices, the mining giant has been generating significant free cash flow, which has underpinned big dividend payments.
But that was then. Let's take a look at what analysts are forecasting for the BHP dividend over the coming years.
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Where is the BHP dividend heading in the coming years?
According to consensus estimates, the market is expecting the BHP dividend to peak in FY 2022. But the good news is that this doesn't necessarily mean that its future yields won't be attractive.
Consensus estimates are for dividends per share of:
- US$3.46 in FY 2022
- US$2.64 in FY 2023
- US$2.02 in FY 2024
- US$1.77 in FY 2025.
Based on the current BHP share price of $37.72 and the latest AUD-USD exchange rates, this will mean yields of:
- 13.6% in FY 2022
- 9.7% in FY 2023
- 8% in FY 2024
- 7% in FY 2025
What's behind these estimates?
These estimates are being driven by the expectation for a pullback in iron ore prices over the coming years. The market is currently forecasting the following for iron ore prices:
- US$132 a tonne in FY 2022
- US$115 a tonne in FY 2023
- US$98 a tonne in FY 2024
- US$89 a tonne in FY 2025
But as we have seen over the last decade, predicting the iron ore price accurately is close to impossible. Things can happen to both the supply and demand side of the equation resulting in vastly different outcomes for prices.
In light of this, the dividend forecasts above could change in the coming months for the better or worse. But for now, if these forecasts prove accurate, the BHP dividend does look like an attractive medium term option for income investors.
