Soaring commodity prices in recent years have seen a number of S&P/ASX 200 Index (ASX: XJO) mining shares significantly ratchet up their dividend payments.
2021 and 2022 were particularly profitable years for most ASX mining stocks as both copper and iron ore prices surged. In June 2021, the iron ore price broke new record highs, trading above US$210 per tonne.
This year, many ASX 200 mining shares scaled back their dividend payouts alongside a retrace in commodity prices.
In May, the iron ore price dipped below US$100 per tonne. However, the industrial metal has been on a strong upwards trajectory since August, currently trading for US$133 per tonne.
And it's with that resilient iron ore price in mind that I think these three ASX 200 mining shares will deliver some bank-busting passive income in 2024.
Targeting ASX 200 mining shares for passive income
The miners in question are BHP Group Ltd (ASX: BHP), Rio Tinto Ltd (ASX: RIO), and Fortescue Metals Group Ltd (ASX: FMG).
Despite significantly cutting their dividends this year, all three ASX 200 mining shares still trade on an attractive, fully franked trailing yield.
At yesterday's closing price:
- BHP shares trade on a yield of 5.6%
- Rio Tinto shares trade on a yield of 4.7%
- Fortescue shares trade on a yield of 7.1%
Now that's the year gone by.
As for the forecast dividend yields in 2024, I won't try to guestimate precise levels. But I believe iron ore prices are likely to average higher next year than this one. This should boost the miners' profitability and the dividends they dole out to shareholders.
Here's why.
Despite a decrease in steel production (which requires iron ore) out of China in October, the World Steel Association reported that global steel production increased by 0.6% year on year to 150 million tonnes.
And in potentially good news for the ASX 200 mining shares, the outlook for steel production in China, the world's biggest iron ore consumer, is looking more robust for 2024.
While it's been slow in coming, the Chinese government is rolling out substantial stimulus measures to spur the country's struggling real estate sector. That sector is responsible for some 60% of the nation's iron ore demand.
Expectations of further stimulus from China's government recently saw Citi increase its three-month price target for iron ore to US$140 per tonne.
While the industrial metal may not maintain those heights throughout 2024, it would certainly offer some tailwinds for the big iron ore stocks heading into the new year. And I expect we'll see that translate to increased dividends.
With leading term deposits currently in the 5% range, and without the 30% franking tax credits, that could well see these three ASX 200 mining shares delivering bank-busting yields in 2024.
