Is the BHP dividend going to increase in the future?

Where is this mining giant's dividend heading to from here?

| More on:
A woman looks nonplussed as she holds up a handful of Australian $50 notes.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • BHP is a firm favourite of income investors
  • It pays billions to shareholders each year in dividends
  • Let's look to see if the BHP dividend has peaked or can increase from here

One of the most popular options for income investors on the Australian share market is the BHP Group Ltd (ASX: BHP) dividend.

And it really isn't hard to see why.

Every year, the Big Australian shares a decent portion of its free cash flow with its lucky shareholders. This has led to tens of billions of dollars being paid to them in recent years.

The good news is that this looks set to be the case again in the future, with plenty more dividends expected to line the pockets of BHP shareholders in the coming years.

And while big dividends are nice, bigger dividends are better. So, will the BHP dividend be increasing in the future?

Where next for the BHP dividend?

First things first, it should be noted that it is already widely accepted that the BHP dividend will almost certainly be lower year on year in FY 2023.

After all, during the first half of the financial year, the mining giant's interim dividend was cut by 40% to 90 US cents due to lower commodity prices and inflationary pressures.

Pleasingly, though, investors can look forward to a bigger final dividend for FY 2023 thanks to recent improvements in the price of its commodities.

For example, Goldman Sachs is forecasting a fully franked US$1.20 per share final dividend in August. This will bring BHP's full-year dividend to US$2.11 per share, which equates to A$3.11 per share at current exchange rates. It also represents an attractive 6.5% dividend yield based on the current BHP share price.

Unfortunately, Goldman isn't expecting the BHP dividend to increase from here. It is forecasting fully franked payouts of US$1.70 (A$2.50) per share in FY 2024 and US$1.21 (A$1.78) per share in FY 2025. This will mean yields of 5.4% and 3.9%, respectively, for investors.

This is based on its expectation that BHP's free cash will soften over the next couple of years and put pressure on its payouts.

Though, it is worth remembering that commodity prices are notoriously hard to predict. Any surprises (positive and negative) to the iron ore price, for example, could have a major impact on Goldman's earnings and dividends estimates.

Motley Fool contributor James Mickleboro 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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Materials Shares

A young man wearing a black and white striped t-shirt looks surprised.
Materials Shares

Guess which small-cap ASX mining stock just surged 38% on a 'significant milestone'

Let's see why investors are fighting to get hold of this share on Friday.

Read more »

Miner looking at a tablet.
Materials Shares

ASX lithium shares like Mineral Resources thrown $150 million government lifeline

Lithium miners in WA can breathe a bit easier amid a new funding announcement.

Read more »

A woman with a sad face stands under a shredded umbrella in a grey thunderstorm
Materials Shares

Sell this ASX 200 lithium stock now amid a 'cloudy outlook'

The ASX 200 lithium producer could have further to fall in 2025.

Read more »

Miner looking at a tablet.
Materials Shares

Why today is a big day for Core Lithium shares

Why is everyone talking about Core Lithium shares today?

Read more »

An unhappy investor holding his eyes while watching a falling ASX share price on a computer screen.
Materials Shares

This ASX All Ords stock just crashed 22%. Here's why

Let's see why this stock is having a bad day after returning from a trading halt.

Read more »

A woman sits at her computer with her hand to her mouth and a contemplative smile on her face as she reads about the performance of Allkem shares on her computer
Materials Shares

This $9.3 billion ASX 200 stock just surged 7%. Here's why

This ASX 200 stock seems to be acting as a safe haven today.

Read more »

A woman jumps for joy with a rocket drawn on the wall behind her.
Materials Shares

Why is this ASX 300 battery tech stock jumping 11% today?

Another agreement and big plans are getting investors excited on Monday.

Read more »

two men in hard hats and high visibility jackets look together at a laptop screen that one of the men in holding at a mine site.
Resources Shares

'I hate what I have done': Mineral Resources share price down as Ellison laments actions

Managing Director Chris Ellison says he deeply regrets the impact of his 'error of judgement'.

Read more »