When it comes to passive income on the Australian share market, few shares attract as much attention as BHP Group Ltd (ASX: BHP).
Often referred to as the Big Australian, BHP is one of the world's largest mining companies, with tier-one assets spanning iron ore, copper, metallurgical coal, and potash.
This includes the Western Australian Iron Ore (WAIO), Olympic Dam, Escondida, and Spence operations, as well as the Jansen potash project.
Income investors tend to like BHP for a few key reasons. Its operations sit at the low end of global cost curves, it generates enormous free cash flow during normal commodity cycles, and management has a clear commitment to returning surplus capital to shareholders.
While its dividends can fluctuate with commodity prices, BHP has built a reputation as one of the market's most generous large-cap dividend payers over the long term. In fact, over the last few years it has returned tens of billions of dollars to its shareholders.
That makes it a popular choice for investors looking to combine blue-chip stability with meaningful passive income.
What would 1,000 BHP shares cost?
BHP shares ended last week at $45.59. At that price, buying 1,000 shares would require an upfront investment of approximately $45,590. That's clearly a sizeable outlay.
But Morgan Stanley thinks it would be worth doing. The broker currently has an overweight rating on the mining giant and a $48.00 price target, suggesting further upside from current levels, alongside potential passive income.
So, how much passive income could they generate?
According to Morgan Stanley's forecasts, BHP is expected to pay fully franked dividends of approximately $1.90 per share in FY 2026, followed by around $1.70 per share in FY 2027.
Based on those estimates, an investor holding 1,000 BHP shares could expect:
- FY 2026 dividend income: approximately $1,900
- FY 2027 dividend income: approximately $1,700
That equates to a forward cash yield of roughly 4.2% in FY 2026 and 3.7% in FY 2027, based on the current BHP share price. Importantly for Australian investors, these dividends are forecast to be fully franked, which can significantly boost after-tax returns for those able to use franking credits.
The bigger picture
Of course, BHP's dividends are not fixed. As a mining company, its payouts rise and fall with commodity prices, demand from China, and broader global economic conditions. In strong markets, its dividends can be exceptionally large, while weaker cycles can see them pull back.
However, for investors seeking long-term passive income from a high-quality, globally significant business, BHP remains a compelling option.
