The BHP Group Ltd (ASX: BHP) share price might be worth thinking about for dividends. It’s expected to pay a dividend yield of more than 15% in FY22.
BHP is one of the world’s biggest resource businesses.
It is exposed to various commodities like iron ore, copper, metallurgical coal, energy coal and oil.
However, the business has been making moves to become greener in recent times. It’s planning to divest its oil business to Woodside Petroleum Limited (ASX: WPL).
The company has talked about its plans to reduce its scope 3 emissions (emissions caused by its customers).
There is also early speculation that BHP is considering selling its coal business(es). The current high coal prices give the resource business an extra thing to think about, whilst it is generating an unexpected high level of profit from coal.
What is the dividend expected to be?
The resources giant is known for paying a big dividend to investors.
At the moment it’s expected to be particularly big because of the fact that multiple resource prices are pretty high right now, but the BHP share price has dropped by 28% since 12 August 2021, likely due to the fall in the iron ore price. A drop in the share price boosts the prospective dividend yield.
Using the estimates on BHP, in FY22 it’s expected to generate $5.60 of earnings per share (EPS). Out of that profit, it’s expected to pay a dividend of $4.17 per share. That translates into a fully franked dividend yield of 10.9%, or 15.6% including the franking credits.
That’s a very big dividend yield for the resources giant. However, the profit and dividend are expected to drop in FY23. The dividend yield including franking credits could be 11.2% in FY23.
Is the BHP share price worth considering?
Resource businesses aren’t likely to generate consistent profit growth year after year. Resource prices are volatile, sometimes cyclical, which has a huge influence on the profit.
But, it does give the opportunity to buy resource businesses when prices are low. Also, BHP is exposed to a number of future-focused commodities that could experience strong long-term demand and good prices like copper, nickel and potash.
The BHP share price seems like it’s at a decent level for income investors, though there are other ASX dividend shares that could be more reliable over the next five years or ten years.
