Yesterday’s earnings report from mining share BHP Group Ltd (ASX: BHP) was one of the most spectacular reports we have seen so far in this February’s earnings season. Given its size and impact on the entire S&P/ASX 200 Index (ASX: XJO), BHP’s numbers (and dividend) are always an ASX watercooler topic. But this one was particularly impactful.
As we covered yesterday, the mining giant reported an 11% increase in revenues to US$27.9 billion. Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) were up 25% to US$15.46 billion, while underlying profits spiked 22% to US$6.2 billion. Statutory profits rose 28% to US$5.64 billion.
It was a momentous report from the ‘Big Australian’ on another level, too. Over the six months to 31 December, BHP’s copper division contributed more than half of the company’s entire earnings. That’s a notable development for a company that has traditionally been known for its iron ore operations.
But perhaps the most exciting piece of news from this earnings report was the revelation of BHP’s next dividend.
BHP unveiled an interim dividend of 73 US cents per share for the period. As with almost all BHP dividends, this one will come fully franked.
This dividend represents a 46% hike over the interim dividend of 50 US cents per share that investors received this time last year. It’s also a 21.67% rise over the 60 US cents per share final dividend from September.
It is the highest dividend BHP shareholders will receive since the final dividend of 2024, worth 74 US cents per share.
So are BHP shares a buy for dividend income?
We don’t yet know exactly how much this latest dividend will be worth in Australian dollar terms yet. However, at today’s exchange rates, investors should expect around $1.03 per share. This would take BHP’s full-year payouts to $1.95 per share.
That would give BHP shares a forward dividend yield of 3.76%, up from the current trailing yield of 3.3%.
So are BHP shares a buy for dividend income? Well, when it comes to mining stocks, I always tend to think of the dividend potential as ‘feast and famine’. When commodity markets are riding high, BHP’s low costs can result in some monstrous dividends. Investors may still fondly recall the annual total of $4.63 per share that the miner paid out back in 2022.
But those dividends can dry up just as quickly. In 2018, for example, BHP doled out just $1.18 per share over the whole year.
As such, I think BHP is a useful income stock, but only part of a well-diversified dividend portfolio. Investors should always be prepared for plenty of ups and downs when it comes to this company.
The post After a 46% dividend hike, are BHP shares a buy for income? appeared first on The Motley Fool Australia.
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Motley Fool contributor Sebastian Bowen 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.