Owning BHP Group Ltd (ASX: BHP) shares has come with a large dividend over the last few years. Investors may be wondering if the good times can continue for passive income, or whether leaner times are ahead.
As the biggest ASX mining share, its profit is heavily influenced by what's going on with commodity prices. The production costs don't typically change much, so any boost or hit to revenue largely flows straight to the net profit line, impacting the dividend.
After everything that has happened this year, let's take a look at what the experts from broker UBS are forecasting.
FY25
In a recent note in early July, discussing the current economic environment, UBS said:
Trade war and related macro risks have moderated since we last reviewed sector commodity and equity calls, and while the outlook is arguably incrementally improved, almost all trade deals are yet to land and China's outlook remains muted ahead of further expected stimulus in 2H. Industrial metal prices and miners' shares have largely recovered following trade war de-escalation, easing fears of a recessionary demand collapse. However, lingering uncertainty post 'Liberation Day' is expected to lead to some near-term softening in demand despite solid secular fundamental drivers like electrification and Chinese stimulus.
The broker is positive on copper, but it's cautious on the outlook for iron ore. While UBS lifted its 2025 and 2026 forecasts for the iron ore price by 4% and 6% respectively to US$97 per tonne and US$90 per tonne, it's expecting the start-up of Simandou (a huge iron ore project in Africa) will push the iron ore price lower by around US$10 per tonne in 2026 towards US$90 per tonne.
UBS forecast that BHP could pay an annual dividend per share of US 97 cents in FY25, which would translate into a grossed-up dividend yield of 5.5%, including franking credits, at the current BHP share price.
FY26
Unfortunately, UBS predicted there could be a significant decline in the 2026 financial year for both the net profit and dividend per share.
The broker forecast BHP could pay an annual dividend per share of US 75 cents in the 2026 financial year. At the current BHP share price, that equates to a grossed-up dividend yield of 4.3%, including franking credits.
FY27
In the 2027 financial year, profit is projected to turn around. This year could see the net profit and dividend both jump by approximately a third.
If UBS is right with its projection that BHP could pay an annual dividend per share of US 99 cents, then the grossed-up dividend yield would be 5.6%, including franking credits.
FY28
Owners of BHP shares may see the payout become even larger in the 2028 financial year, which would be welcome news for income investors hoping the company can return to stronger levels of passive income.
UBS projected that BHP could pay an annual dividend per share of US$1.06. At the current BHP share price, that would equate into a grossed-up dividend yield of 6%, including franking credits.
FY29
The 2029 financial year could be best year of this series of projections.
BHP could pay an annual dividend per share of US$1.27 to investors in FY29, according to UBS.
At the current BHP share price, that would translate into a grossed-up dividend yield of 7.2%, including franking credits.
UBS currently prefers BHP shares to Rio Tinto Ltd (ASX: RIO) shares for a few reasons:
i) emergent geopolitical risk in Mongolia (Oyu Tolgoi) and Guinea (Simandou, delays likely), ii) questions surrounding RIO's lithium strategy, and iii) RIO's CEO changeover… In contrast, BHP's WAIO retains industry-leading margins, QLD coal appears to be stabilising and BHP's copper production is strong YTD. Potential for M&A remains…
