BHP Group Ltd (ASX: BHP) shares have developed a reputation over the last decade as having one of the largest dividend in the world.
BHP's main earnings come from two commodities: iron ore and copper, so whatever happens with those two resources is key.
China and BHP are currently in negotiations about the price of its iron ore, with reports that state-run iron ore buyer CMRG has banned domestic steel mills from purchasing BHP's iron ore.
Before I get to the dividend projections, I think it's important to look into some expert thoughts about the current ban and how that could play into the outlook for BHP shares.
At the start of October, broker UBS gave some context about CMRG and what it expects:
…We understand the dispute relates to how adjustments to spot benchmark prices (eg Fe grade, impurities) should be priced in the long-term volume contracts.
…We expect any ban to be short term due to the mutual interdependence of BHP and China steel; in our opinion however, BHP looks more vulnerable than Vale (due to improving Brazil-China relations) & RIO (due to Simandou JV).
…In our opinion, and if the reported ban on BHP iron ore imports is accurate, it may be challenging in the immediate term for BHP to find new customers for its shipments to China given its relative importance; as a result if this ban of BHP's iron ore is imposed strictly by China, we would expect a fall in BHP's shipments from Australia over the next 1-2 weeks.
But, equally and critically, if these reported bans are accurate, we would expect Chinese buyers (CMRG, independent mills) to need to source alternate supply. Hence higher prices for non-BHP brands (for now limited to nil evidence to date, but China is on Golden Week national holidays at the moment); and a switch of trade from ex-China markets into China, which would then allow BHP cargoes formerly destined for Chinese buyers to rebalance into other markets. In this scenario, we would expect such a process to play out over some months and with frictions related to realised pricing and freight costs.
Now let's take a look at how big the dividends could be for owners of BHP shares.
Image source: Getty Images
FY26
We're now in the 2026 financial year, so there's less than nine months until the end of FY26. It will be interesting to see how quickly the business is able to resolve the difficulties with China regarding the iron ore shipments.
Currently, UBS is forecasting that BHP could pay an annual dividend per share of US$1.09 in FY26.
At the current BHP share price, that projection suggests the business could deliver a grossed-up dividend yield of 5.7%, including franking credits.
FY27
The projections from UBS suggest that the earnings per share (EPS) and dividend per share of BHP could fall by approximately 10% in the 2027 financial year.
UBS forecasts that BHP could pay an annual dividend per share in FY27 of US$1 per share.
FY28
The 2028 financial year could be almost identical for BHP in terms of the EPS and dividend per share. If UBS is right, the mining giant could pay an annual payout of US$1.
FY29
Things could start getting better for the ASX mining share in the 2029 financial year, if the broker's forecasts come true.
In FY29, UBS is projecting that the business could hike its annual dividend per share by 25% to US$1.25, which could be the best year for passive income since FY24.
FY30
The last year in this series of projections could be the best one. The 2030 financial year could mean an annual dividend per share of US$1.38, according to UBS estimates.
