Today is a great day to own BHP Group Ltd (ASX: BHP) shares for a couple of reasons.
The first reason is that the mining giant's shares are avoiding the market weakness and are pushing higher on Thursday.
At the time of writing, the BHP share price is up almost 0.5% to $39.68.
As a comparison, the S&P/ASX 200 Index (ASX: XJO) is down by 0.55% to 7,954.8 points.
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What else?
The other reason that it is a good day to own BHP shares is that today is pay day for the Big Australian's eligible shareholders.
Last month, BHP released its half year results and reported a 23% decline in underlying attributable profit to US$5.1 billion.
This profit decline was driven largely by a decline in realised iron ore and steelmaking coal prices, which offset higher realised copper prices.
Its lower earnings and a 10% increase in capital and exploration expenditure, meant that its free cash flow was down 30% on the prior corresponding period to US$2.6 billion.
In light of this, the BHP board decided to cut its fully franked interim dividend by 30.5% to an eight-year low of 50 US cents (79 Australian cents) per share.
It is this dividend that is being paid to eligible shareholders (those that owned shares before the ex-dividend date of 9 March) on Thursday.
What's next for the BHP dividend?
According to a note out of Goldman Sachs, its analysts are expecting the mining giant to pay dividends per share of US$1.02 in FY 2025 and then US$1.12 in FY 2026.
This equates to A$1.62 per share and A$1.93 per share, respectively, at current exchange rates.
Based on the current BHP share price of $39.68, this will mean fully franked dividend yields of 4.1% and 4.9%, respectively.
Should you buy BHP shares?
Goldman isn't just expecting good dividend yields, it expects some major upside for the miner's shares.
The note reveals that the broker has a buy rating and $47.30 price target on them. This implies potential upside of 19% for investors over the next 12 months. Combined, that's a total potential 12-month return in the region of 23%.
Commenting on its buy recommendation, the broker said:
BHP is currently trading at ~0.8x NAV and ~6x NTM EBITDA, below the 25-yr average EV/EBITDA of 6.5-7x, but at a premium to RIO on ~5.3x and ~0.7x NAV. Over the last 10 years, BHP has traded at a ~0.5x premium to global mining peers. We believe this premium 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).
