Owners of South32 Ltd (ASX: S32) shares are predicted to receive some pleasing dividends in the next few years to 2026.
This ASX mining share is involved in a number of different commodities including bauxite, alumina, aluminium, copper, silver, lead, zinc, nickel, metallurgical coal and manganese. The company operates in Australia, Southern Africa, and South America.
Forecast payouts
The broker UBS expects the South32 profit to drop significantly in FY24. Revenue is expected to fall by 9% to US$6.75 million, and net profit after tax (NPAT) is expected to fall by 41% to US$539 million.
But, NPAT is expected to jump to US$1.09 billion in FY25 and then reach US$1.17 billion in FY26.
The higher profits could lead to bigger payouts after FY24.
In FY24, South32 could pay an annual dividend per share of US 4 cents, or AU 6.1 cents at the current exchange rate.
FY25 could see owners of South32 shares receive an annual dividend per share of US 10 cents, or AU 15.25 cents.
In FY26, the ASX mining share could pay an annual dividend per share of US 11 cents, or AU 16.8 cents.
South32 dividend yield
So, how do these projections translate into dividend yields?
South32 has paid fully franked dividends over the last several years. In FY24 its payout could translate into a grossed-up dividend yield of 2.8%. That's not very exciting.
But, the FY25 potential dividends could equate to a grossed-up dividend yield of 7.1%, which is a good passive income payout.
The FY26 predicted payment is even bigger – the South32 grossed-up dividend yield could be 7.8%.
Is this a good time to invest in South32 shares?
Tony Locantro from Alto Capital certainly thinks so. On The Bull, he suggested there are risks with the Chinese economy, so investors could sell Fortescue Metals Group Ltd (ASX: FMG) shares and switch to a diversified resource producer, like South32.
UBS also called South32 shares a buy, with a price target of $3.95, implying a possible rise of 28% over the next year. The broker was pleased with the sale price the miner got for its Illawarra coal asset.
But, its performance is reliant on what happens with commodity prices. Some investors may prefer businesses with more consistent and predictable growth.
