One of the simplest ways to think about dividend investing is to work backwards from income. How much capital do you need to invest today to generate a meaningful cash return over the next year?
In the case of BHP Group Ltd (ASX: BHP), the answer may come as a surprise to some investors.
How the numbers stack up
At the current BHP share price of approximately $47.22, purchasing 100 shares would entail an investment of around $4,722.
According to current market forecasts, BHP is expected to pay the equivalent of $1.51 per share in fully franked dividends in FY26.
For an investor holding 100 shares, that translates to cash dividends of approximately $150 over the year, plus the benefit of franking credits, which can materially increase the after-tax return for Australian investors, depending on individual circumstances.
That kind of income potential helps explain why BHP remains one of the most popular dividend shares on the ASX.
Why BHP remains a premier dividend stock
BHP is not a traditional high-yield utility or bank. Its dividends can fluctuate from year to year, reflecting movements in commodity prices and earnings.
However, what sets BHP apart is its scale, diversification, and balance sheet strength. The company operates some of the world's highest-quality assets across iron ore, copper, and other commodities, allowing it to generate substantial cash flow through the cycle.
Importantly, BHP has demonstrated a willingness to return excess capital to shareholders when conditions permit, rather than overextending itself through aggressive expansion. That discipline has helped underpin its dividend-paying ability over time. It has also supported numerous share buybacks, which is another way to return capital to shareholders.
Fully franked income matters
For Australian investors, the fully franked nature of BHP's dividends is a key part of the appeal.
Franking credits can significantly enhance the effective yield, particularly for retirees or investors on lower marginal tax rates. While dividends are never guaranteed, receiving income that comes with franking credits can make a meaningful difference to total returns over the long run.
Not just about income
While the $150 in forecast income is attractive, BHP is not purely an income play.
The company also offers exposure to long-term demand drivers such as electrification and infrastructure investment, particularly through its growing copper business. I believe that provides the potential for capital growth alongside income, rather than relying solely on dividends.
Foolish Takeaway
Buying 100 shares of BHP today could deliver around $150 a year in passive income, based on current forecasts, with the added benefit of franking credits.
Of course, commodity prices move, and dividends can change. But for investors looking for a combination of scale, income potential, and long-term relevance, I think BHP remains one of the ASX's premier dividend shares and is worth considering as part of a balanced share portfolio.
