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BHP share price rises on Massive HY22 dividend


The BHP Group Ltd (ASX: BHP) share price is rising after the ASX 200 (ASX: XJO) resources giant reported a giant half-year dividend in its result.

BHP’s strong HY22 result

BHP revealed that its profit soared in the first six months of FY22 to 31 December 2021.

  • It said that continuing operations profit from operations rose 50% to US$14.8 billion, with underlying EBITDA rising by 33% to US$18.5 billion. Continuing underlying attributable profit rose 57% to US$9.7 billion. Continuing operations net operating cash flow rose 26% to US$11.5 billion.

    What’s all this about “continuing’ and why is BHP making this distinction? BHP is planning to divest its petroleum assets to Woodside Petroleum Limited (ASX: WPL) later this year. For that reason, BHP is showing its profit excluding petroleum, and with petroleum. With petroleum included, these were the overall numbers (with even more growth):

    • Attributable profit rose 144% to US$9.4 billion
    • Underlying attributable profit grew 77% to US$10.7 billion
    • Net operating cash flow of US$13.3 billion, up 42%
    • Underlying profit / earnings per share (EPS) grew by 144% to US$1.866
    • Interim dividend growth of 49% to US$1.50 per share

    Why was the BHP result so good?

    BHP makes its profit from the resources that it sells. There’s the price it gets for its commodities and how much it produces. The miner has already told investors how its production went for the six months. The iron ore production was slightly higher.

    But most importantly, the average realised price for all of its commodities was higher in HY22 than in HY21. Higher prices can be a strong driver of the BHP share price.

    The copper price was up 30% to US$4.31 per pound, the iron ore price was 9% higher to US$113.54 per wet metric tonne, the metallurgical coal price was 166% higher to US$259.71 per tonne, the thermal coal price was up 210% to US$137.68 per tonne and the nickel price was up 30% to US$19,651 per tonne.

    Iron ore miners like Fortescue Metals Group Limited (ASX: FMG) and Rio Tinto Limited (ASX: RIO) are also benefiting from the higher iron price.

    The discontinued petroleum business also saw higher prices. Oil prices were 79% higher, natural gas prices were 51% higher and the LNG price was 239% higher.

    BHP share dividend

    The board of BHP has decided to pay a record interim dividend of US$1.50 per share, which comes to a total of US$7.6 billion. This translates into a 78% dividend payout ratio.

    Outlook for the BHP share price

    The business has now completed the unification of its dual-listed corporate structure.

    In terms of the outlook, BHP says it’s positive about the long-term global economic growth and commodity demand. Population growth, the infrastructure of decarbonisation and rising living standards are all expected to drive demand for energy, metals and fertilisers for decades to come.

    BHP said that demand-led inflation in the broader economy is expected to endure for some time, which is fundamentally positive for the resources industry.

    For commodities, it said that prices look good for the longer-term for copper, nickel and potash. Coal has medium-term uncertainty.

    With iron ore, Chinese demand for iron ore is expected to be lower than it is today as steel production plateaus and the scrap-to-steel ratio rises. In the long-term, prices are expected to be determined by the high cost production.

    I think BHP is a solid blue chip. At the right time, it could be one of the good ASX dividend shares to buy when the iron ore price falls, like in 2016 and November 2021. But I’d be willing to wait for now.

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