How many BHP shares do I need to buy for $10,000 of passive income?

BHP Group Ltd (ASX: BHP) has long been a favourite among Australian dividend investors.

And with its enormous mining operations, strong cash generation, and history of returning billions of dollars to shareholders, it isn’t difficult to see why.

But how much would you need invested in the mining giant to generate $10,000 in annual passive income? Let’s take a look.

Why BHP remains popular

One of the main reasons BHP is so popular is the scale and quality of its mining operations.

The company owns some of the world’s most important mineral resources, including operations that have been producing for decades and still have substantial reserves remaining.

This gives BHP opportunities to keep generating cash and investing in production for many years.

Its financial strength is another reason. BHP has generally been able to maintain a strong balance sheet while funding major projects and returning substantial amounts of money to shareholders.

Of course, mining is a cyclical business, and even BHP cannot escape fluctuations in commodity prices.

When prices are high, profits and dividends can be enormous. When they weaken, shareholder returns can fall significantly.

However, BHP’s size, asset quality, and financial resources arguably make it one of the better options for investors seeking dividend income from the resources sector.

So, what could its shares deliver over the coming years?

How many BHP shares would you need?

According to CommSec, BHP is forecast to pay fully franked dividends of $2.07 per share in FY 2027.

Based on its current share price of $60.94, this represents a forecast dividend yield of approximately 3.4%.

To generate $10,000 in annual passive income at that rate, an investor would need to own approximately 4,831 BHP shares.

Buying that many shares today would require an investment of around $294,400.

That’s certainly a substantial amount of money to have invested in one company, which is why I would generally favour building a diversified income portfolio rather than relying entirely on BHP.

However, eligible Australian investors could also benefit from franking credits attached to those dividends.

What about future passive income?

The good news for investors is that CommSec expects BHP’s dividends to increase over the following two years.

Despite an expected earnings dip in FY 2028, dividends are forecast to edge higher to $2.10 per share.

For someone holding 4,831 shares, that would mean approximately $10,145 in annual passive income.

By FY 2029, CommSec expects dividends to increase to $2.38 per share, potentially lifting annual passive income from the same holding to almost $11,500.

It is worth remembering that these are only forecasts and actual dividends will depend heavily on commodity prices and BHP’s earnings.

Nevertheless, they demonstrate why the mining giant remains a popular option for Australian income investors.

The post How many BHP shares do I need to buy for $10,000 of passive income? appeared first on The Motley Fool Australia.

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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 no position in any of the stocks mentioned. The Motley Fool Australia has recommended BHP Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.