Owning BHP Group Ltd (ASX: BHP) shares has been a solid choice for passive income over the last decade. It could still be a good choice for FY27.
There are a couple of reasons why ASX mining shares can deliver an appealing dividend yield. Firstly, they usually have a relatively low price/earnings (P/E) ratio compared to other sectors. Secondly, the big miners are usually generous with their dividend payout ratios.
Iron ore miners like BHP can have particularly low P/E ratios because their earnings can be more volatile than other commodities – the iron ore price can shift significantly, depending on what's happening with Chinese demand.
But, with the iron ore price sitting at around US$100 per tonne (according to Trading Economics), BHP can still generate compelling iron ore profit. Plus, its growing copper exposure can help provide more stability and diversification to its earnings.
With all of the above in mind, let's see what passive income payments owners of BHP shares could expect in FY27.
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Projected passive income
According to Commsec's estimate, the ASX mining share giant is forecast to pay an annual dividend per share of A$2.06.
Of course, the potential payout may not be exactly that figure. It could be smaller or larger, depending on commodity prices.
An increasing volume of iron ore coming out of Africa could, for example, negatively impact the iron ore price. But it's also possible that Chinese demand could be stronger than expected. Time will tell how the next 12 months play out.
If BHP pays that level of income to shareholders, it would translate into a grossed-up dividend yield of 5.2% at the time of writing, including franking credits. The yield isn't as high as it was a year ago following a rise of close to 50% for the BHP share price – this hurts the prospective yield, though it's great for long-term shareholders.
How much to invest in BHP shares for $1,000 of annual dividends?
The BHP share price certainly isn't cheap these days, but investors can still buy a slice of the mining giant.
If investors do receive A$2.06 per share in the 2027 financial year, then to receive $1,000 of annual dividends, an investor would need to own 486 BHP shares.
To buy 486 BHP shares, it would cost an Australian $27,415 at the time of writing.
BHP is a solid business, but I think there are even better options out there for returns.
