Here's the BHP dividend forecast through to 2028

A happy construction worker or miner holds a fistfull of Australian money, indicating a dividends windfall

BHP Group Ltd (ASX: BHP) shares were in the spotlight last week when the mining giant released its quarterly update.

In case you missed the update, let’s take a quick look at what the Big Australian reported.

Firstly, coming in ahead of the expectations of analysts at Goldman Sachs were both copper and iron ore production. It notes:

BHP reported a slightly stronger than expected March Q with iron ore and copper production +2% vs. GSe and iron ore shipments of 69.8Mt +5% vs. GSe (but in-line with Visible Alpha Consensus Data).

And while metallurgical coal production was well short of estimates due to wet weather impacts, forcing a production guidance downgrade, the general consensus was that this was a solid three months for the miner.

But what impact has this update had on the market’s expectations for the BHP dividend in the coming years?

Let’s now dig deeper and see what analysts are forecasting for the mining giant’s future payouts.

The BHP dividend

Firstly, for FY 2024, Goldman Sachs is expecting BHP to lower its payout ratio to 55%.

This is expected to lead to total fully franked dividends of US$1.45 per share for the 12 months. This represents approximately A$2.27 per share based on current exchange rates, which will mean a dividend yield of 5.1%.

Though, it is worth remembering that approximately half of this dividend has already been paid to shareholders. So, if you were to buy BHP shares next week, you would only be entitled to the final dividend, which will be declared in August and paid out in September.

FY 2025 onwards

Unfortunately, Goldman Sachs believes that BHP’s dividend will be cut each year until at least 2028 due to softening earnings.

In FY 2025, the broker is expecting a fully franked dividend of US$1.26 (A$1.97) per share. This represents a dividend yield of 4.4%.

Moving on, Goldman is forecasting a modest cut in FY 2026 to a fully franked US$1.22 (A$1.91) per share. This would mean a 4.3% dividend yield.

In FY 2027, the broker expects a fully franked US$1.12 (A$1.75) per share. This equates to a 3.9% dividend yield.

Finally, another small cut is forecast in FY 2028, with Goldman pencilling in a fully franked US$1.07 (A$1.67) per share dividend. This represents a dividend yield of 3.75%.

In summary, this means dividends per share of:

• FY 2024: US$1.45 (A$2.27) per share.
• FY 2025: US$1.26 (A$1.97) per share.
• FY 2026: US$1.22 (A$1.91) per share.
• FY 2027: US$1.12 (A$1.75) per share.
• FY 2028: US$1.07 (A$1.67) per share

It is worth remembering that a lot can change in a short space of time in the mining sector. For example, if iron ore prices suddenly surge on supply issues (or vice versa), this could have a positive (or negative) impact on its earnings and lead to higher (or lower) dividends.

Investors should use these BHP dividend estimates as a guide, rather than as gospel.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the ‘five best ASX stocks’ for investors to buy right now. We believe these stocks are trading at attractive prices and Scott thinks they could be great buys right now…

See The 5 Stocks *Returns as of 1 February 2024

More reading

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 positions in and has recommended Goldman Sachs Group. 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.