Owners of BHP Group Ltd (ASX: BHP) shares have received major dividend payments over the last few years. With the iron ore price suffering in recent months, investors may be wondering how much passive income BHP can deliver in 2025.
One of the trickiest things for income-focused investors with ASX mining shares is that their profits and payouts are heavily linked to commodity prices. We don't know what the iron ore price will do or what any other commodity's price will be.
The broker UBS recently noted that Chinese economic signals for iron ore were "weak", with the Chinese business Baowu recently warning of a "severe winter" for the steel industry.
UBS pointed out that BHP had the highest and most resilient iron ore profit margins thanks to its low-cost production. BHP is the broker's preferred iron ore stock if there is "protracted weakness in China demand and robust supply growth".
The broker also noted that BHP could generate between 30% to 40% of its earnings before interest, tax, depreciation and amortisation (EBITDA) outside of iron ore in the next year or two. This refers to BHP's other commodities, such as copper. However, UBS is wary of BHP pursuing major acquisitions.
Despite the problems with the iron ore price, BHP is still projected to pay decent dividends in the coming years.
FY25 dividend projection
In FY24, the miner paid an annual dividend per share of US$1.46, with a final dividend of US 74 cents. The final dividend amounts to US$3.8 billion in total, with the full-year cash returns being US$7.4 billion.
According to UBS' projections, the passive dividend income per share is projected to be US$1.42 per share in FY25. This represents a reduction of around 3%. If we look at that payout in Australian dollar terms, it's around A$2.13 per share at the current exchange rates.
That forecast payout could translate into a fully franked dividend yield of 5.5% and a grossed-up dividend yield of 7.9%.
How much passive income could a $10,000 investment in BHP shares?
At today's pre-open BHP share price of $38.45, an investor could buy 260 BHP shares.
If the projection proves accurate, investors could receive an annual cash dividend payment of $553.80 for FY25 with that number of shares. Including the franking credits, the grossed-up passive income could be $791.14.
That's an appealing level of passive income. However, UBS currently projects that owners of BHP shares could receive an annual dividend per share of US$1.31 in FY27 and US$1.17 in FY28. So, investors shouldn't count on the yield in future years to be as strong as FY25.
