BHP dividend forecasts

First, there are a couple of things to explain.

The first is that BHP’s financial year ends on 30 June. So, the year ending 30 June 2023 is ‘FY2023’. The following year is ‘FY2024’.

The second is that BHP reports its financials, and declares its dividends, in US dollars. So, all forecasts are in dollars. This is important to note because the GBP/USD exchange rate is quite volatile at the moment. In other words, the yield on offer today could be quite different to the yield when the dividends are actually paid if exchange rates fluctuate.

As for the forecasts, right now City analysts expect BHP to pay out $2.09 per share for FY2023 and $1.86 per share for FY2024.

These projected payouts are lower than the $3.25 paid last financial year. However, they still translate to very high yields. At today’s share price and exchange rate, the projected payout for FY2023 equates to a prospective yield of 8.3% while the estimated payout for FY2024 translates to a prospective yield of 7.4%.

Assuming that these dividend forecasts are accurate (analysts’ estimates can be way off the mark at times), BHP looks set to continue being a cash cow for investors.

Are BHP shares worth buying for income?

Would I buy BHP shares for the big dividends on offer? The answer to that question is actually no.

One reason I’d pass on BHP is that the stock is ‘cyclical’ (mining companies’ profits rise and fall depending on commodity prices) and, therefore, quite volatile. For example, between mid-2014 and early 2016, BHP’s share price fell from near 1,600p to near 500p. I don’t see the point of collecting a 8% yield if the share price can potentially fall around 70% like it did here. I’d need many years of dividends to make up for that kind of capital loss. I prefer dividend stocks that are a little more stable in nature.

Another issue for me is the fact that BHP tends to cut its dividend when business conditions are challenging. This is not ideal from an income-investing perspective. I prefer to invest in companies that consistently increase their dividend payouts year after year. I can rely on these kinds of businesses to provide me with a certain level of income.

So, while the yield here does look very attractive, I won’t be buying the shares for my portfolio any time soon. Ultimately, I’d prefer to invest in what I regard as ‘safer’ dividend stocks.

While high inflation expectations still abound, it would be ideal if my portfolio could yield a better income return. I know this is not the easiest ask across the FTSE 100 index, however. For example, its dividend yield stands at just 3.7%. Once I take into the account the current rate of UK inflation (10%), my real income return is -6.3%.

I invest to make more money, not less. So, which sector can offer me the best prospect of high, inflation-beating, long-term income?

Mining for high dividends

Two mining dividend stocks have caught my eye for the level of income they have been paying investors this year. They are BHP Group (LSE:BHP) and Rio Tinto (LSE:RIO).

In BHP’s case, the Anglo-Australian mining company has form with paying mammoth dividends. If I buy the shares now I will be in time to receive the next upcoming dividend payment. Analysts at Credit Suisse have predicted that BHP’s annual 2022 dividend yields could be as high as 16.2%, and 15.5% in 2023. I believe this indicates some great long-term prospects.

Though Rio Tinto has a higher current dividend yield than BHP (11.7%), I think this is due to the fact it enjoyed its highest interim profits ever reported during 2020 and 2021. So, it is likely I may have already missed the dividend gravy train. Particularly as iron ore, a key part of its business, has been falling in price.

Reliable income payer

BHP is known to pay high dividends when metal prices are up. But at the same time it is not afraid to cut back when commodities are doing less well. It consistently has a dividend coverage ratio of around 1.5 times or more. This strikes me as a reliable income payer over long periods of time, even amid market volatility.

The company’s payout ratio is much more consistent than that of Rio Tinto.

A dividend stock with capital upside

The common theme with these mining dividend stocks, is that their profits have been boosted by higher commodities price for metals in recent times. These factors have lifted their dividend payouts to investors.

I consider this to be a short-term phenomenon. Good short-term performance is not enough to justify inclusion in my portfolio. So, which of these stocks offer me the best value in the long run?

BHP Group, with a price-to-earnings (P/E) multiple of 4 times, is offering slightly more value than Rio Tinto (5.1 times). Both stocks look cheap to me when compared to copper miner, Antofagasta (15.7 times).

In this sense, I believe BHP, out of all the other mining stocks, looks like the best long horizon choice for me. It can offer me high, reliable income, above inflation, as well as the prospect of capital growth.

As an investor seeking to mitigate the impact of increasing inflation, an investment in a high-dividend-yield mining company like BHP Group (LSE:BHP) may provide me with a degree of comfort and protection.

Globally, there has been a strong and consistent demand for metals and commodities, particularly from an energy sector pivoting towards investment and development in renewable technologies. This demand has resulted in the spot price of copper more than doubling from March 2020 ($2.13lb) to hit its peak in March 2022 ($4.69lb), although it has receded in recent weeks by over 20% to serve as a gentle reminder of the volatility of commodities.

Unsurprisingly, the share price of BHP has trodden a similar path to the copper prices since March 2020, where it started its meteoric ascent from 1,054p to a lofty peak of 3,019p in late March 2022. With such tight correlation to the price of copper, however, it should come as no surprise to see BHP lose similar ground in recent weeks with its share price also receding by approximately 20%.

Mining stocks have historically been viewed as cyclical, with the traditional wisdom being that demand for raw materials and commodities falls during recessionary periods, dragging down mining share prices with them. So, with the UK teetering on the edge of a recession, it is worth considering whether BHP still presents an attractive case for investment.

Well, the current dividend speaks for itself, with BHP delivering a mouth-watering 11.5% yield. However, since I seek capital growth as well as sky-high dividends, the investment appraisal is not straightforward. 

Volatility in the commodities market, in particular copper, continues to drive volatility in share prices in the mining sector. BHP stands out from the mining crowd, however, in its efforts to diversify its portfolio through exposure to the potash market, which could provide me with mitigation against market volatility whilst also providing the opportunity for significant returns on my investments in the future.

Potash is a potassium-rich crop fertiliser. Previously, 40% of all supplies of potash originated from Russia and Belarus; however, this supply has now been choked as a result of economic sanctions in response to the Ukrainian conflict. 

Over the last five years, potash prices have bumbled along between $200-$250 per tonne, but as soon as Russian soldiers set foot in Ukraine, that price rocketed to $562 per tonne, where it has stayed ever since. Irrespective of how the current Ukrainian conflict plays out, there is little doubt that the Western economies will continue to reduce their reliance on the supply of Russian commodities.

In response, BHP is already reshaping its portfolio of projects by seeking to capitalise on the demand for potash by recently approving a £5.6bn investment in the Jansen Stage 1 project in Canada that will be capable of delivering 4.35 million tonnes of potash per year from 2027 onwards.  

Whilst the current BHP dividend yield of 11.5% is hard to ignore, the seeds of the recent Jansen Stage 1 investment are not due to bear fruit for another five years, so this cautious investor plans to sit and wait until I can see some green shoots of growth from BHP’s potash strategy!

FTSE 100 mining business

BHP is one of the world’s largest mining businesses. The Australian-based firm mines and sells a plethora of commodities such as iron ore, coal, copper, and uranium. With operations in around 90 countries and supported by 80,000 employees, it has a global profile and presence.

So what’s happening with BHP shares right now? Well, as I write, they’re trading for 2,186p. At this time last year, the stock was trading for 1,901p, which is a 14% increase over a 12-month period.

The best stocks to buy have risks too

Although commodities prices are currently higher than usual due to macroeconomic headwinds, they are often volatile. This volatility can affect performance as well shareholder returns. An example of volatility has been BHP’s demand for iron ore from China. Is this unusually high demand sustainable or will it subside?

Next, although I like BHP shares to pay dividends and boost my passive income stream, dividends are not guaranteed. They can be cancelled at the discretion of the business at any time. In fact, BHP did cancel dividend payments recently, namely in 2016 and 2020.

It is worth noting that the rising cost of materials as well as the supply chain crisis could also have a negative impact on operations and performance. This is something I will keep an eye on.

The bull case

So to the positives. Continuing to talk of dividend payments, BHP shares currently have a dividend yield of over 12%. This is close to four times the FTSE 100 average of 3%-4%. Not many of my best stocks to buy can attest to such an enticing yield.

It is worth remembering dividends are underpinned by performance. I do understand that BHP’s past performance is not necessarily a guarantee of its future performance, however. Looking back, it has consistently recorded revenues of over $42bn for the past four years. In addition to this, I noted that its 2021 performance surpassed pre-pandemic levels by some distance, hitting $56bn of revenue.

Next, at current levels, BHP shares look good value for money too on a price-to-earnings ratio of just 10. The general consensus is that a P/E ratio of below 15 on the FTSE 100 represents value for money on the surface of things.

Finally, as one of the biggest mining businesses in the world, BHP’s performance, returns, and growth prospects are underpinned by its vast reach and profile. The old adage too big to fail springs to mind for me here.

Overall, I would add BHP shares to my holdings. I believe they would boost my passive income stream nicely as well as continue to provide consistent returns in the long term. As a dividend seeker, I truly believe it is one of the best stocks I can buy.

Oil and gas merger

In May, BHP completed a merger with Woodside Petroleum worth an estimated $41bn. The merged business could soon enter the top ten energy producers globally.

The transaction itself only involves the merging of BHP’s oil and gas segment, with its metal operations staying separate.

While some have speculated that BHP is trying to offload its  oil and gas operations, others have pointed to the advantages that the merger will bring. 

Woodside Petroleum, for instance, has a varied and wide range of oil and gas exploration and production opportunities. 

Furthermore, oil is trading at its highest price since 2013 on account of demand after the pandemic, and supply concerns caused by the war in Ukraine. Gaining exposure to Woodside’s operations could therefore be advantageous for BHP.

Strong financial results

Recent financial results also indicate that BHP is in a healthy position. For the six months to 31 December, the company reported a 50% increase in operational profit to $14.8bn.

In addition, it reported that free cash flow was at $8.5bn. As a potential investor, this is encouraging because this cash could be used to for controlled expansion or paying down debt.

It should be noted, however, that past performance is not necessarily indicative of future performance.

BHP has also recently stated that it is investing a greater amount of capital into its early-stage growth projects. 

These include Australian copper mines. Copper is in high demand and this trend may continue in the future, because copper is a central component in electric vehicles (EVs). 

However, any pandemic resurgence may grind BHP’s operations to a halt, which would probably be bad news for the share price.

Buying BHP shares also seems like a good idea from the perspective of dividends. Last year, the business paid a record interim dividend of $1.50 per share, from a total dividend pot of $7.6bn. It should be noted, however, that dividend policies can change in the future. 

What’s more, the company has enjoyed earnings growth over the past five years. During this time period, earnings-per-share (EPS) rose from ¢126.5 to ¢223.5. By my calculations, this means that BHP has a compound annual EPS growth rate of 12%.

Overall, this firm is flying high on the back of surging commodity prices. The financial results are encouraging, and the merger could be an exciting opportunity to tap in further to higher oil prices. I will be buying shares soon. 

However, a new wave of Chinese lockdowns has triggered fears of a slowdown. Glencore shares fell by 10% last week. This has not only left the stock with a forecast dividend yield of 9%, but also a more uncertain outlook. Today, I’m asking whether I should buy the dip with Glencore.

Glencore dividend looks real to me

Unlike rivals such as Anglo American and BHP, Glencore has said it will not sell its coal mines. Instead, the company plans to gradually run them down, while maintaining high operational standards.

Surging coal prices in 2021 and 2022 suggest to me that Glencore’s ability to read the market remains strong. The company is expected to report a record net profit of $16bn for 2022, more than three times the $5bn figure reported in 2021. Nearly half of this year’s profits are expected to come from coal.

Broker forecasts suggest Glenore will pay a record dividend of $0.52 per share this year, giving the stock a forecast yield of 9.1%. That payment would be covered more than twice by Glencore’s 2022 forecast earnings of $1.31 per share. This suggests to me this high dividend yield is affordable, based on today’s market conditions.

What could go wrong?

My main concern is that mining is a cyclical business. Profits are high now, thanks to strong commodity prices. I am not sure how much longer this will last.

I think there’s a good chance that high inflation in Western countries and slowing growth in China could cause commodity prices to fall. If coal prices return to more normal levels, I do not think profits from Glencore’s other activities would replace this lost income.

City analysts seem to share this view. The latest consensus forecasts show Glencore’s profits falling by 35% in 2023, and by a further 25% in 2024. The dividend is also expected to fall, although not by so much.

Glencore share price: my verdict

Glencore floated on the London market at 500p in 2011. It has taken nearly 11 years for the stock to return to this level.

My sums suggest that shareholders may have received around 20% of their original investment back as dividends during that time, but that is only equivalent to around 2% per year.

I’m looking for a bigger return on my investment than that. Although Glencore’s 9% dividend yield is attractive to me, I don’t generally buy shares in companies where profits and the dividend are expected to fall.

In the short term, I think the Glencore share price could bounce back to over 500p. But on a medium-term view, I think the business is likely to face some headwinds that could hold back growth.

I think it’s likely Glencore’s peak profits are making its shares look cheaper than they really are. For this reason, I won’t be buying Glencore for my portfolio at current levels.

One exciting development is the creation of small modular reactors. These could be used to build smaller, cheaper nuclear power stations. That could speed up nuclear growth and boost demand for uranium.

I’ve been hunting for uranium shares to add to my portfolio. Here are three I’d consider buying today.

A top uranium producer

For a big uranium producer with an attractive dividend yield, I’d choose mining giant BHP (LSE: BHP). The company’s Olympic Dam mine in Australia is best known for its copper, but also contains a lot of uranium.

BHP produced nearly 2,300 tonnes of uranium concentrate in 2021. I estimate it’s one of the world’s top five producers of the nuclear fuel.

The main downside of BHP as a uranium stock is that much of the group’s profit comes from iron ore and other materials. This means the rising uranium price will only have a limited impact on earnings.

However, BHP shares currently offer a forecast dividend yield of more than 8% and look quite reasonably valued to me. This is a stock I’d be happy to own in my portfolio.

A nuclear fuel business

One uranium stock that should benefit directly from higher prices is US firm Cameco (NYSE: CCJ). This £8bn firm is listed on the New York Stock Exchange, but I’d be able to buy it through my UK share dealing account.

Cameco owns a number of uranium mines and also produces nuclear fuel for use in power stations. Interestingly, the company is keeping some of its mines idle. From what I can tell, management is playing a long game and betting on higher uranium prices in the future.

Cameco looks promising to me as a long-term play on nuclear power. My main concern is that this business has not been very profitable in recent years. Despite higher uranium prices last year, the company reported a $100m loss for 2021.

Broker forecasts suggest that by 2023, sales will rise to $2.1bn while profits will reach $180m. However, that still leaves the stock valued on 36 times forecast earnings, which seems a little pricey to me.

I reckon Cameco has potential as a long-term investment, but I’d prefer to wait for a better buying opportunity.

Pureplay uranium stocks

The world’s biggest uranium producer is Kazakhstan firm Kazatomprom. Although I can buy shares in this company on the London market, Kazatomprom is still 75%-owned by the Kazakh state wealth fund. For me, it’s just too risky.

Instead of buying Kazatomprom shares, I’d consider buying into Yellow Cake (LSE: YCA). This is a uranium trading and investment business with a long-term contract to buy uranium from Kazatomprom.

Yellow Cake’s profits depend on movements in the uranium price. But the company reported a profit of $172m for the six months to 30 September 2021, based on the increased value of its uranium assets.

I’d consider buying Yellow Cake shares to bet on long-term uranium price growth.

• The travel firm TUI may see its share price rise from the reopening of international borders
• BHP Group mines copper, a precious metal used in the development of electric vehicles
• Both companies could be a great place for me to invest £1,000

With £1,000 to invest in the stock market, I’m on the lookout for the best shares to buy now. Having scoured the indexes, I think I’ve found two great companies. The first, TUI (LSE: TUI), is a travel firm that may well benefit from the global reopening after the Covid-19 pandemic. Secondly, BHP Group (LSE: BHP) is a business that mines a number of commodities, like iron ore and copper. These commodities can have many uses in a number of industries. What justifies investment in these companies? Let’s take a closer look. 

Are travel companies the best shares to buy now?

For the three months to 31 December 2021, TUI reported positive results. Revenue was €2.4bn, compared to a mere €0.5bn for the same period in 2020. Furthermore, the number of passengers increased by 1.7m to 2.3m, with a load factor of 79%. This tells me that more aircraft are flying more passengers.

With a strong liquidity position of €3.3bn, the firm may also benefit from the reopening of borders. Just this month, Norway removed all its pandemic-related restrictions. Switzerland and Sweden have made similar moves. I think this could have a domino-effect, as more and more countries completely reopen.

This progress could be halted, however, if other variants arise in the near future. Nonetheless, the comeback of the tourism industry makes TUI one of the best shares for me to buy now.

Metals for the future 

The second company, BHP, mines a number of metals and coal. Indeed, iron ore and copper account for 80% of the company’s sales. In recent results for the six months to 31 December 2021, the firm reported a profit of $18.5bn. This is a 33% increase from the same period in 2020. 

Furthermore, the results showed a 27% gain in revenue to $30.5bn. While these figures are very encouraging, the iron ore price has suffered. This is chiefly because of policy changes in China that have reduced the need for the commodity.

Nonetheless, copper is essential for efforts to decarbonise. Specifically, this precious metal is a critical component of electric vehicles (EVs). In this sense, the business may well benefit from moves to create a greener world, potentially making it one of the best shares to buy now.

Both of these companies may experience an uptick in the near future. The world is reopening and this can only be a good thing for travel companies. With its strong liquidity position, I think TUI is a good investment at current levels. Furthermore, BHP’s exposure to important precious metals could be very positive indeed. I will be splitting my £1,000 evenly and buying shares in both of these stocks.

Mining champion 

The first company on my list is mining group BHP (LSE: BHP). This firm recently announced a bumper set of results. Buoyed by rising commodity prices, the corporation announced a 61% increase in pre-tax profit for the six months to the end of December. 

Thanks to this growth, management has hiked the firm’s dividend to investors. After the recent increase, the shares support a dividend yield of 11.5%. 

Unfortunately, commodity prices are highly volatile, so BHP’s bumper profitability may not last forever. This is a significant risk I will be keeping in mind as we advance. If profits slump, the firm may have to slash its payout. 

Still, it looks to me as if high commodity prices are here to stay, at least for the next year or so. As such, I would buy BHP for my Stocks and Shares ISA today for its income credentials. 

Stocks and Shares ISA property buy

As well as BHP, I would also buy Big Yellow (LSE: BYG). The self-storage group might not offer a double-digit yield, but it does have a lot of growth potential, in my view.

Over the past 10 years, the firm has built a portfolio of self-storage facilities throughout the UK. And it is still creating new facilities. Demand for new storage facilities is running high, and Big Yellow is looking to capitalise on this potential. 

The one risk of this approach is that the company could end up overexpanding. If it invests too much and grows too far, too fast, shareholders could have to end up footing the bill. The firm might have to ask shareholders for cash to strengthen its balance sheet. 

Despite this risk, I believe the stock has a lot of income potential. At the time of writing, the shares offer a dividend yield of 2.9%.

However, this payout could grow if the firm’s earnings expand as it builds out the portfolio. There is also the potential for capital growth if the business’s growth plans yield favourable results. 

Leading income stock 

Financial services group Abrdn (LSE: ABDN) would also earn a place in my Stocks and Shares ISA portfolio. With a yield of 6.3% at the time of writing, the stock offers one of the highest yields in the FTSE 350. I am also attracted to the business as it has lots of growth potential over the next few years. 

The company is currently building out its investor offering by acquiring smaller wealth managers, and by buying online stockbroker Interactive Investor, Abrdn is trying to reach a new audience. 

This strategy could backfire. If it does, the firm could end up paying a lot of money for nothing. It may have to cut its dividend if the company ends up overexpanding. I will be keeping an eye on this risk factor going forward. 

Still, considering the group’s position in the market, reputation, and scope for growth during the next few years, I believe it deserves a place in my Stocks and Shares ISA. 

With that in mind, let’s explore two dividend stocks with exceptionally high yields that I think have plenty of long-term potential.

Profiting from inflation

For most consumers and companies alike, inflation sucks. The increased cost of living typically results in lower consumer spending that can impact individual businesses as well as wider economic growth. However, there are a select number of sectors that can drastically profit from the situation.

The industry that’s currently at the top of my list is mining. Extracting metals from the ground is primarily a fixed-cost process. So, when inflation pushes up commodity prices, the profit margins of these businesses can expand drastically.

Both Rio Tinto (LSE:RIO) and BHP Group (LSE:BHP) have already begun reaping the benefits. While inflation has only recently started entering the picture, both of these businesses have enjoyed tailwinds thanks to the surging demand for battery and renewable energy metals over the last two years. 

Looking at the interim results for both firms ending in June 2021, net income exploded by 271% and 140%, respectively. So, it’s not surprising that the dividend payout followed suit, and now both stocks offer a yield of around 8.6%!

With inflation pushing prices even higher, these dividends may continue to expand for the foreseeable future. Does that make these stocks the best dividend investment today? Possibly, but it’s not without its risks.

Even the best dividend stocks have risks

As impressive as the passive income-generating capabilities of these dividend stocks might be, they’re ultimately driven by metal prices. And since these are set by the market rather than the business, there is virtually no recourse available for management to counter falling metal prices.

At the moment, commodities are on the rise. But the higher prices haven’t gone unnoticed. As other mining businesses enter the arena to capitalise on the opportunity, global supply may eventually outweigh demand. In that scenario, prices will naturally start to decline, potentially jeopardising the dividend yield as well as sending these stocks in the wrong direction.

The bottom line

Personally, I feel the potential reward is worth the risk. The world is shifting towards electric vehicles and renewable energy technologies. Therefore the need for precious metals like copper, lithium and nickel mined by these businesses isn’t likely to disappear any time soon. At least, that’s what I think.

Combining this with their established mining portfolios and decades of expertise makes me believe these could be the best dividend stocks to add to my portfolio today.