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the BHP Group Ltd. (ASX: BHP) is the stock price a good food for thought for dividend income potential in FY22?
BHP is one of the largest companies in the world. According to ASX, it has a market capitalization of $ 145 billion.
What does the BHP dividend look like in FY22?
BHP’s dividend outlook hinges on profit generation, which obviously depends quite a bit on the prices of the commodities it deals with, including iron ore, copper, petroleum and coal.
Macquarie Group Ltd. (ASX: MQG) is one of the positive brokers on BHP at this level. He predicted that the commodities giant will pay a dividend of $ 3.61 per share in fiscal 22, which will translate into a gross dividend yield of around 10%. Macquarie’s earnings forecast places BHP’s stock price at 11 times FY22 earnings. Broker rates BHP as a buy.
But there are also price predictions that are not so bullish.
UBS has a conservation rating on BHP shares, with a price target of $ 42 (suggesting a double-digit drop in the share price over the next 12 months). Iron ore prices are expected to decline over the next several years as demand decreases and supply improves. Although it expects a lower dividend from BHP, UBS appears to believe the resource giant will make more profit than Macquarie expected. According to UBS figures, BHP has a gross FY22 yield of 9.7% and the BHP share price is valued at just over 9 times the estimated earnings of FY22.
BHP’s record production
The resource giant this week published its operational report for the fiscal year ended June 30, 2021. Record production was achieved in its “Western Australia Iron Ore (WAIO)” and Goonyella. Olympic Dam achieved both the highest annual copper production since the acquisition by BHP in 2005 and the highest gold production on record for the operation.
FY21 saw iron ore production increase 2% to 253.5 Mt. In the last quarter of FY21, iron production increased 9% to 65.2 Mt.
But there may be more to come, depending on management.
BHP CEO Mike Henry said:
South Flank, Australia’s largest and one of the most technically advanced iron ore mines, began production in May and will improve the overall quality of BHP’s iron ore product line. The same month, the Ruby project in Trinidad and Tobago started production. Atlantis Phase 3 in the Gulf of Mexico and Spence’s expansion in Chile began production in the first half of the year.
BHP is in great shape. Our operations are performing well, continuing our history of disciplined capital allocation, and our portfolio is being positively leveraged by the megatrends of decarbonization, electrification and population growth.
In FY22, BHP expects its iron ore production to be quite similar to that of FY21, with a range of production forecasts ranging from a 2% decline to an increase. by 2%.
Copper production for fiscal 22 is expected to experience a performance of between a 3% decline and an 8% increase.