Last week, BHP Group Ltd (ASX: BHP) released its quarterly update, as we covered here.
While the mining giant posted production declines across the board, this was at least in line with the market's expectations. In some cases, its production was actually better than expectations.
In response to the update, a number of brokers have been updating their estimates for BHP's earnings and dividends.
Let's see what one leading broker is now forecasting for the latter in the coming years.
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BHP dividend forecast
According to a note out of Goldman Sachs, its analysts are expecting BHP to pay a fully franked dividend of US$1.22 per share in FY 2024. This is the equivalent of A$1.93 per share at current exchange rates. Based on the current BHP share price of $44.43, this would mean a 4.3% dividend yield for income investors.
Moving onto FY 2025, Goldman expects the Big Australian's underlying earnings to soften year on year from US$12.4 billion to US$11.3 billion. In line with this decline, the broker is forecasting the miner's dividend to reduce to US$1.11 per share (A$1.76 per share). This equates to a 4% yield at current levels.
In FY 2026 and FY 2027, Goldman unfortunately expects more of the same, with underlying earnings forecast to decline to US$10.4 billion and US$9.6 billion, respectively. This is expected to lead to the BHP dividend being cut to US$1.03 per share (A$1.63) in FY 2026 and then US$0.94 per share (A$1.45 per share) in FY 2027.
If this forecast proves accurate, it will mean a yield of 3.7% and 3.25%, respectively, for the two financial years.
Finally, in FY 2028, Goldman believes BHP's earnings and dividend will start to recover. It is forecasting underlying earnings of US$10 billion and a US$0.99 per share (A$1.57 per share) dividend. This represents a 3.5% dividend yield for investors.
In summary:
- FY 2024 – US$1.22 per share – 4.3% yield
- FY 2025 – US$1.11 per share – 4% yield
- FY 2026 – US$1.03 per share – 3.7% yield
- FY 2027 – US$0.94 per share – 3.25% yield
- FY 2028 – US$0.99 per share – 3.5% yield
All in all, these aren't the type of monster dividend yields that investors have become accustomed to in recent years. However, a lot can change with commodity prices in a short period, so don't be surprised if these estimates change over time.
