BHP Group Ltd (ASX: BHP) shares have not only gained 7% over the past 12 months, they've also delivered some outsized dividends.
In FY 2023, the S&P/ASX 200 Index (ASX: XJO) mining giant delivered a total of $2.62 per share in fully franked dividends.
At the current BHP share price of $46.80, that equates to a trailing yield of 5.6% — with potential tax benefits from those franking credits.
While that's nothing to sneeze at, it's a far cry from the dividends BHP paid out in FY 2022. And it may be significantly less than the passive income investors in the ASX 200 iron ore miner could receive in FY 2024.
Here's what's happening.
Why did the BHP dividend come down in FY 2023?
When the ASX 200 miner reported its full-year FY 2023 results, most of the core financial metrics had slumped from the prior year, including the BHP dividend payout.
BHP reported a 17% decline in revenue to US$53.8 billion, while underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) decreased 31% to US$28 billion.
This saw the miner's underlying attributable profit also slump by 37% year on year to US$13.4 billion.
The company faced headwinds over the year from inflationary cost pressures and, crucially, from a far lower price for its iron ore, the top revenue earner for BHP shares.
For much of FY 2022, the iron ore price was trading in the US$140 per tonne or higher range. Much of FY 2023 saw the industrial metal trading in the US$120 per tonne or lower range.
The bullish iron ore market in FY 2022 led to a full-year BHP dividend payout of $4.63 per share. That's 77% higher than the passive income the miner paid to shareholders over the past 12 months.
What can passive income investors expect now?
There are numerous factors that will determine the full-year FY 2024 BHP dividend payout.
But a big one, to be sure, is the price of iron ore.
For its FY 2024 guidance, BHP is forecasting iron ore production of 254 million tonnes to 264.5Mt, which could see the miner exceed the 257MT produced in FY 2023.
On the cost front, it expects unit cash costs of US$17.40 to US$18.90 per tonne. This means the miner could also potentially be facing lower costs than FY 2023, where unit costs came in at US$17.79 per tonne.
As for iron ore, the price edged up over the weekend to be trading for US$133.85 per tonne. That already puts the price above the average realised in FY 2023.
But there could be more tailwinds ahead to help the BHP dividend rebound.
The analysts at Citi recently upped their three-month target for the iron ore price to US$140 per tonne. The broker cited expectations that fiscal stimulus from the Chinese government will spur the nation's struggling property sector, fuelling steel demand in the world's number two economy.
If Citi has this right, that should see a sizeable uptick in BHP's profits over the coming months. And investors may enjoy an equally sizeable boost in the next BHP dividend.
