Why BHP Shares Might Experience a Dividend Comeback in 2024

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BHP Group Ltd (ASX: BHP) has witnessed a 7% increase in shares over the past 12 months, accompanied by robust dividends. In FY 2023, the mining giant, listed on the S&P/ASX 200 Index (ASX: XJO), distributed a total of $2.62 per share in fully franked dividends, resulting in a trailing yield of 5.6% at the current BHP share price of $46.80, with potential tax benefits from franking credits.

Factors Behind FY 2023 Dividend Decrease

The decline in key financial metrics, including a 17% drop in revenue to US$53.8 billion, a 31% decrease in underlying EBITDA to US$28 billion, and a 37% year-on-year slump in underlying attributable profit to US$13.4 billion, contributed to the reduction in the BHP dividend payout for FY 2023. The main challenges included inflationary cost pressures and a significantly lower price for iron ore, BHP's primary revenue source. In the context of ASX dividend Stock, BHP's financial setbacks underscore the impact of external factors on dividend distributions within the context of the broader Australian Securities Exchange (ASX) dividend stock landscape.

Impact of Iron Ore Price in FY 2022 and FY 2023

Throughout FY 2022, the iron ore price often exceeded US$140 per tonne, whereas in much of FY 2023, it traded in the US$120 per tonne or lower range. This contrast in iron ore prices influenced the full-year BHP dividend payout, which was $4.63 per share for FY 2022, representing a 77% increase compared to the dividends paid in the last 12 months.

Outlook for FY 2024 and Determining Factors

Looking ahead to FY 2024, several factors will impact the BHP dividend payout, with the price of iron ore being a significant determinant. BHP's guidance for FY 2024 anticipates iron ore production between 254 million tonnes and 264.5 million tonnes, potentially surpassing the 257 million tonnes produced in FY 2023. On the cost front, the company expects unit cash costs of US$17.40 to US$18.90 per tonne, suggesting potential cost reductions compared to FY 2023.

Current Iron Ore Price and Analyst Predictions

As of now, the iron ore price has risen to US$133.85 per tonne, exceeding the average realized in FY 2023. Citi analysts have recently increased their three-month target for the iron ore price to US$140 per tonne, citing expectations of fiscal stimulus from the Chinese government boosting steel demand. If this prediction holds true, it could lead to increased profits for BHP in the coming months, potentially resulting in a higher dividend for investors.
Location: Australia

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