BHP Group Ltd (ASX: BHP) shares were in the spotlight last week when the mining giant released its quarterly update.
In case you missed the update, let's take a quick look at what the Big Australian reported.
Firstly, coming in ahead of the expectations of analysts at Goldman Sachs were both copper and iron ore production. It notes:
BHP reported a slightly stronger than expected March Q with iron ore and copper production +2% vs. GSe and iron ore shipments of 69.8Mt +5% vs. GSe (but in-line with Visible Alpha Consensus Data).
And while metallurgical coal production was well short of estimates due to wet weather impacts, forcing a production guidance downgrade, the general consensus was that this was a solid three months for the miner.
But what impact has this update had on the market's expectations for the BHP dividend in the coming years?
Let's now dig deeper and see what analysts are forecasting for the mining giant's future payouts.
The BHP dividend
Firstly, for FY 2024, Goldman Sachs is expecting BHP to lower its payout ratio to 55%.
This is expected to lead to total fully franked dividends of US$1.45 per share for the 12 months. This represents approximately A$2.27 per share based on current exchange rates, which will mean a dividend yield of 5.1%.
Though, it is worth remembering that approximately half of this dividend has already been paid to shareholders. So, if you were to buy BHP shares next week, you would only be entitled to the final dividend, which will be declared in August and paid out in September.
FY 2025 onwards
Unfortunately, Goldman Sachs believes that BHP's dividend will be cut each year until at least 2028 due to softening earnings.
In FY 2025, the broker is expecting a fully franked dividend of US$1.26 (A$1.97) per share. This represents a dividend yield of 4.4%.
Moving on, Goldman is forecasting a modest cut in FY 2026 to a fully franked US$1.22 (A$1.91) per share. This would mean a 4.3% dividend yield.
In FY 2027, the broker expects a fully franked US$1.12 (A$1.75) per share. This equates to a 3.9% dividend yield.
Finally, another small cut is forecast in FY 2028, with Goldman pencilling in a fully franked US$1.07 (A$1.67) per share dividend. This represents a dividend yield of 3.75%.
In summary, this means dividends per share of:
- FY 2024: US$1.45 (A$2.27) per share.
- FY 2025: US$1.26 (A$1.97) per share.
- FY 2026: US$1.22 (A$1.91) per share.
- FY 2027: US$1.12 (A$1.75) per share.
- FY 2028: US$1.07 (A$1.67) per share
It is worth remembering that a lot can change in a short space of time in the mining sector. For example, if iron ore prices suddenly surge on supply issues (or vice versa), this could have a positive (or negative) impact on its earnings and lead to higher (or lower) dividends.
Investors should use these BHP dividend estimates as a guide, rather than as gospel.
