Is the BHP share price a buy for its 5% dividend yield?

Let's dig into whether BHP is appealing for payouts.

The BHP Group Ltd (ASX: BHP) share price has dropped more than 10% since mid-June, as the chart below shows, which has boosted the dividend yield.

BHP has been an excellent dividend pick over the last decade, with the ASX mining share benefiting from various times of higher iron ore prices. Even an iron ore price of US$100 per tonne can allow it to make good earnings.

The company's main commodities are iron ore and copper, though it also produces coal and is building a potash project in Canada called Jansen.

Following the company's recent valuation decline, I think it's worthwhile to consider the ASX mining share.

Happy man in a holiday shirt holding out Australian dollar notes, symbolising dividends.

Image source: Getty Images

Dividend projection

According to the forecast on Commsec, the business could deliver a relatively pleasing dividend payout for shareholders.

The business is projected to pay an annual dividend per share of A$2.148 in the 2026 financial year. At the time of writing, this translates into a forward grossed-up dividend yield of 5.4%, including franking credits.

That's not the biggest dividend yield on the ASX and the BHP dividend yield has been higher in recent years. That's partly because the BHP share price has gone up so much in recent times, it's (still) up 25% this year and up 47% in the past 12 months.

The higher the share price goes, the lower the dividend yield, assuming the dividend payment stays the same.

Is the BHP share price a buy?

There's much more to the appeal of a business than just the passive income on offer.

The valuation also needs to make sense; otherwise, capital losses could offset the passive dividend income.

The latest update from the ASX mining share was its operating update for the period ending 30 June 2026.

Its most important commodities are iron ore and copper, so I'll focus on those.

In the three months to June 2026, copper production was 491.9k, up 3% quarter-over-quarter but down 5% year-over-year. Iron ore production was 68.1mt, up 8% quarter-over-quarter, but down 3% year-over-year.

What was perhaps even more interesting was the guidance it gave. BHP produced 1.95mt of copper in FY26, but only expects between 1.65mt to 1.8mt of copper in FY28 – a sizeable decline. FY27 iron ore production is expected to be between 260mt to 272mt, down from 264.7mt in FY26.

Lower copper production is not ideal, given its plans to ramp up production in the coming years to take advantage of strong demand.

Even so, both the copper price and iron ore price are at strong enough levels that the business can generate strong profits. However, at the current elevated BHP share price, I'm not sure it's an attractive buy.

Broker analysts seem to have a similar view. According to CMC Invest, of 14 recent ratings on the ASX mining share, two were buys and 12 were holds. The average price target is $59.08, suggesting only a slight rise (at the time of writing) over the next 12 months.

There are quite a few other ASX shares I'd rather buy for dividends.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended BHP Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on ASX Share Market News

An ASX investor relaxes on her couch as the Harvey Norman share price drops due to the shares trading ex-dividend from today.
Share Gainers

Here are the top 10 ASX 200 shares today

The ASX managed to pull a rabbit out of the hat today.

Read more »

Shot of a young businesswoman looking stressed out while working in an office.
Broker Notes

6 ASX stocks receiving analyst downgrades this week

Brokers reduced their ratings on NextDC, Ampol, Regis Resources, and other stocks this week. 

Read more »

Facebook thumbs up symbol surrounded by boxes with the word 'Like'.
Broker Notes

6 ASX stocks upgraded by leading brokers this week

Brokers have raised their ratings on Pro Medicus, South32, New Hope, and others. 

Read more »

Buy now written on a red key with a shopping trolley on an Apple keyboard.
Broker Notes

6 ASX shares experts are backing amid the market downturn

Brokers maintained a positive view on Qantas, NAB, Maas Group, BHP, and other shares.

Read more »

Two woman holding a tablet and clipboard examine a server rack in a data centre.
ASX Share Market News

Data centre disasters: Why you should think twice before buying Maas Group and NextDC shares

Can these fallen ASX shares bounce back and double from here, or will they keep deteriorating?

Read more »

Two work colleagues looking at a laptop and discussing something.
Broker Notes

Should you buy Hub24, Northern Star, and Transurban shares?

Morgans has given its verdict on these shares. Is it time to buy? Let's find out.

Read more »

Man and woman holding a tablet and clipboard while looking at the backside of server racks in a data centre.
Broker Notes

Buy, hold, sell: Sigma, Cliunvel, and NextDC shares

Let's see how analysts rate these shares this week.

Read more »

AI microprocessor on motherboard computer circuit.
Broker Notes

Xero or hero? UBS predicts the latter with huge upside for the accounting stock

AI is not all doom and gloom for this accounting software provider.

Read more »