BHP Group Ltd (ASX: BHP) has just reported its FY21 half-year result. It cemented its status as a dividend share with a major increase to its shareholder payout.
What did BHP report in HY21?
BHP reported that its profit from operations increased by 17% to US$9.75 billion, whilst shareholder attributable profit fell 20% to US$3.88 billion. Statutory profit / earnings per share (EPS) also declined by 20%, to US$0.766.
However, the underlying profitability figures were much more encouraging. Underlying EBITDA rose 21% to US$14.7 billion, underlying attributable profit rose 16% to US$6 billion and underlying EPS grew 16% to 119.4 cents.
Net operating cash flow increased by 26% to US$9.37 billion.
Why such a divergence of performance between the underlying result and the statutory result? BHP explained that the statutory result included an exceptional/one-off loss of US$2.2 billion predominately relating to the impairments of New South Wales Energy Coal (NSWEC) and associated deferred tax assets, and Cerrejon.
The company said that this result reflected strong underlying operational performance, with record production achieved at Western Australia Iron Ore (WAIO) and record average concentrator throughput delivered at Escondida. The higher iron ore and copper prices, combined with strong operational performance, particularly helped things.
Projects
BHP said that its four major projects under development are progressing well, with first production achieved from the ‘Spence Growth Option’ (SGO) on time and budget in December 2020. South Flank is on track to deliver first production by the middle of the 2021 calendar year, and remains on budget.
BHP’s big dividend
BHP’s board decided to increase the interim dividend by 55% to 101 cents, representing an 85% payout ratio of underlying profit.
Summary thoughts
BHP continues to be a strong performing business. Its diversification has helped it through the last two recessions – coal helped in the GFC and iron ore is powering it ahead now.
With such a big dividend increase, BHP looks like a high yield ASX dividend share at the moment. However, who knows how long China will keep buying this much iron ore. That’s not the type of bet I’d want to make for my own portfolio.
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