BHP Group Ltd (ASX: BHP) shares delivered a record high, fully franked interim dividend of $2.08 per share in 2022.
The 2022 final dividend of $2.55 cents per share was just off the prior year's all-time high payout of $2.72 per share.
But with commodity prices coming off the boil, the S&P/ASX 200 Index (ASX: XJO) mining giant cut its 2023 interim dividend to $1.36 per share.
That's still not bad.
BHP shares closed Friday trading for $46.42 apiece. That equates to a trailing yield of 8.4%, with some potential tax benefits. Though it's well below the 11% plus yields many investors were enjoying from the stock a year ago.
Now, here's why China may have just boosted the 2024 dividend outlook from the big miner.
Image source: Getty Images
How might China lift the dividends paid by BHP shares?
Dividends, as you likely know, are closely tied to a company's revenues and profits.
BHP shares derive most of their revenue from iron ore. Copper is the number two earner for the ASX 200 miner.
For much of this year, both industrial metals were sliding hard amid sluggish global growth.
Resource-hungry China has been particularly slow to rebound from its pandemic reopening, with its real estate sector in the doldrums.
This saw iron ore fall to US$100 per tonne by 31 May. Copper was trading for US$8,089 per tonne on the day.
But both metals have come roaring back in June. That's likely linked to early rumours of pending stimulus from the Chinese government. Rumours that are beginning to play out.
Up another 0.8% overnight to US$113.30 per tonne, iron ore has gained 13% in June. And the copper price has leapt 6% so far this month.
This, in turn, has helped drive the BHP shares to a 10% gain since the closing bell on 1 June.
What are the experts saying on Chinese stimulus measures?
The People's Bank of China (PBoC) unexpectedly cut short-term loan rates on Wednesday and then again yesterday.
But that's unlikely to be the end of the government's stimulus, with analysts indicating likely additional measures will be announced to help revive household consumption and the struggling construction industry.
Which would be good news for BHP shares.
According to Chen Xi, a fixed-income analyst at Kaiyuan Securities (quoted by The Australian Financial Review):
There is a high probability that there will be follow-up measures such as loosening credit and loosening finances, and these are all good for the economy.
Capital Economics China economist Julian Evans-Pritchard added, "Second quarter is shaping up to be weaker than we had anticipated, and further policy support is probably needed to prevent the economy from entering a renewed downturn."
A faster-growing Chinese economy will see the nation demand more copper and iron ore to fuel that growth.
That, in turn, would offer some tailwinds for BHP shares heading into 2024 and boost the outlook for the miner's dividends.
Cautioning investors not to put the stimulus cart ahead of the dividend horse, Romano Sala Tenna, co-founder of Katana Asset Management, said (quoted by the AFR):
People are thinking that China has turned on the taps again. The last few times they have done that, it's been great for resources, but it's been incrementally less positive each time.
According to Sala Tenna, the outlook for the dividends from BHP shares will be more dependent on the sentiment of Chinese consumers and businesses than stimulus measures.
"I think the bigger impact will be on sentiment rather than on the underlying fundamentals. It will be positive, but it won't be the same as previous stimulus cycles," he said.
