How much passive income would I make from 300 BHP shares?

Is this mining giant a good source of income? Let's see what analysts are predicting.

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BHP Group Ltd (ASX: BHP) shares are a popular option for passive income investors.

That's because the mining giant returns a substantial portion of its bumper profits each year to its shareholders, often lining shareholders' pockets with tens of billions of dollars.

But what sort of passive income could you earn if you buy BHP shares today? Let's examine what investors could expect.

Passive income from BHP shares

Let's imagine that you were to pick up 300 shares in the Big Australian.

With BHP shares currently changing hands for $44.09, this would mean an investment of $13,227 is needed.

This is a fairly large investment, but would it be worth it?

Goldman Sachs appears to believe it could. The broker currently has a buy rating and a $49.00 price target on its shares.

This means that if the mining giant's shares rose to that level, your 300 units would have a market value of $14,700. That's approximately 11% or $1,473 greater than your original investment, which means you are off to a great start.

Now let's look at what passive income BHP shares could provide for investors.

According to a note out of Goldman Sachs, its analysts are forecasting a fully franked US$1.45 (A$2.17) per share dividend in FY 2024. This means that those 300 units would generate a passive income of A$651.

But the dividends won't stop there, so let's keep going and see what future years could bring.

As I covered here recently, Goldman then expects a fully franked US$1.26 (A$1.88) per share dividend in FY 2025. This will mean a passive income of A$564 for that year.

Moving on, in FY 2026 the broker expects another small cut to US$1.22 (A$1.82) per share, fully franked. If this proves accurate, it will lead to a passive income of A$546 for investors.

Goldman then expects fully franked dividends per share of US$1.12 (A$1.67) in FY 2027 and US$1.07 (A$1.60) in FY 2028. This would generate income of A$501 and A$480, respectively.

Commenting on its buy recommendation, the broker said:

BHP is currently trading at ~6.0x NTM EBITDA, (25-yr average EV/EBITDA of ~6-7x) vs. RIO on ~5.5x. BHP is trading at 0.9x NAV (A$49.2/sh), vs. RIO at ~0.9x NAV. That said, we believe this premium vs. peers can be partly maintained due to ongoing superior margins and operating performance (particularly in Pilbara iron ore where BHP maintains superior FCF/t vs. peers), high returning copper growth, and lower iron ore replacement & decarbonisation capex.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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