The BHP Group Ltd (ASX: BHP) share price is on watch after announcing its FY21 result. It also announced a very large dividend for investors.
BHP FY21 result
The resources business announced that its profit from operations soared 80% over the year to US$25.9 billion, with underlying EBITDA (EBITDA explained) rising by 69% to $37.4 billion.
BHP said that it achieved a strong underlying operational performance, with record volumes achieved at the Western Australia Iron Ore (WAIO), Goonyella and Olympic Dam, and Escondida maintained average concentrator throughput at record levels. The miner’s strong profit reflected the higher iron ore and copper prices.
Underlying ‘attributable’ profit increased by 88% to US$17 billion whilst reported attributable profit rose 42% to US$11.3 billion. The lower reported profit reflected a US$5.8 billion impact predominately relating to the impairments of its potash and energy coal assets, and the current year impact of the Samarco dam failure.
BHP dividend and balance sheet
The resource giant’s board decided to declare a monster dividend for FY21 of US$3.01 per share, which was an increase of 151%. This is a 89% dividend payout ratio.
BHP’s balance sheet significantly increased over the year thanks to its 73% rise of net operating cashflow (to US$27.2 billion). Net debt improved 66% to US$4.1 billion.
The big dividend could help the BHP share price.
Projects
The business said that it achieved first production at four major development projects, all of which were delivered on or ahead of schedule. It also bought an additional 28% working interest in Shenzi.
It continues to invest in exploration options including the all-cash takeover offer of Noront Resources in Canada and the signing of an agreement for a nickel exploration alliance in Canada.
BHP oil to merge with Woodside Petroleum Limited (ASX: WPL)
BHP has been considering what to do with its oil business for a while. Yesterday, it was reported that Woodside was going to merge with BHP’s oil business.
It turns out that this speculation was indeed correct and that deal is going to happen.
Woodside released a separate announcement announcing the deal and its benefits.
Unify its corporate structure
Up until now, BHP has been two businesses – one in Australia and one in the UK.
But that’s going to change. BHP says it’s going to unify the businesses under Australia’s parent company. This is expected to be simpler and more efficient, reduce duplication and streamline its governance and internal processes. Previously, this change was expected to cost US$1.2 billion, but now it will only cost between US$400 million to US$500 million.
It will still have listings in London, Johannesburg and New York though.
If approved, unification is expected in the first half of the 2022 calendar year.
Summary thoughts on BHP and the share price
Shareholders are going to get a huge dividend, so that’s a good plus for investors.
It seems to make a lot of sense to exit its oil business and the corporate restructuring seems smart as well.
There are a lot of positives in this report, but we’ll have to see how profit goes in FY22 and beyond. Iron ore is still generating a large amount of the profit, but the iron price is falling as Chinese demand falls.
I wouldn’t want to buy at today’s BHP share price – it’s best not to buy at near the top of the cycle. There are other ASX dividend shares I have my eyes on instead.
