When investors think about passive income on the ASX, the big banks usually get most of the attention.
But Australia's large mining shares can also play an important role in an income-focused portfolio. Their dividends can fluctuate with commodity cycles, but the scale of their operations and strong cash generation often allow them to return large amounts of capital to shareholders.
That's why I think BHP Group Ltd (ASX: BHP) shares deserve consideration from investors looking to generate passive income over the long term.
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A mining giant that generates enormous cash flow
BHP is one of the largest resources companies in the world, producing commodities that are essential to the global economy.
Its portfolio includes iron ore, copper, and other minerals used in construction, infrastructure, and energy systems. Because of the scale and quality of its operations, the company is capable of generating very large cash flows during favourable commodity cycles.
Those earnings often translate into sizeable dividends for shareholders. While payouts can vary depending on commodity prices, BHP has a long history of returning significant capital to investors.
For income investors who are comfortable with some cyclicality, I think that cash-generating ability is a major attraction.
Copper could become even more important
One reason I think BHP remains compelling for long-term income investors is its growing exposure to copper.
Copper is widely used in electrical systems, renewable energy infrastructure, and electric vehicles. As the global economy electrifies and decarbonises, demand for copper is expected to increase significantly.
BHP already has a major presence in copper production through its large operations in South America. In recent years, copper has become an increasingly important contributor to the company's earnings.
If long-term demand for copper continues to rise as many analysts expect, BHP could benefit from both higher production and favourable prices over time.
That would support the company's ability to continue generating strong cash flows and paying dividends.
Potash adds another long-term growth option
Another part of the story that often gets overlooked is BHP's potash project.
The company is developing the Jansen potash mine in Saskatchewan, Canada, with production expected to begin in the coming years. Once fully ramped up, it is expected to become one of the world's largest potash operations.
Potash is a key fertiliser ingredient used in agriculture. As the global population grows and food production becomes more important, demand for fertilisers could increase significantly.
For BHP, this project provides exposure to a completely different commodity market that is linked to global food demand rather than industrial activity.
Over time, that diversification could support both earnings stability and long-term growth.
Foolish takeaway
BHP's dividends may not be perfectly predictable from year to year, but the company's ability to generate enormous cash flows has made it a major income payer on the ASX for many years.
With growing exposure to copper and a new potash business on the horizon, the company also has several long-term growth drivers.
For investors seeking passive income with exposure to global resources markets, BHP shares could be well worth considering.
