Shares in the global miner are still down 9% over the last 6 months but are rallying following its yearly update.
Mining giant BHP (ASX: BHP) underpins the gains in the Australian market on Tuesday.
The stock, which has the highest weightage among individual stocks on the ASX, was up nearly 4% at $40.41 a share.
What is bolstering the BHP stock price today?
Mining shares have been under pressure over the last few months as the softening iron ore price and concerns over the demand outlook in China weigh.
BHP’s shares are still down more than 9% over the last 6 months while the decline in Rio Tinto and FMG shares has been in double digits over the same period.
But investors were able to set worries aside on Tuesday after the mining giant delivered its highest profit since 2011. BHP posted a better than expected 26% jump in annual profit. The underlying profit from continuing operations rose to $21.32 billion thanks to strong commodity prices and record sales at its Western Australian iron ore operations.
But what is really impressing shareholders is the windfall payout they will receive. BHP declared a final dividend of US$1.75 (AUD$2.49) per share, taking the full-year distribution to a record US$3.25 (AUD$4.63) per share. It enabled BHP shares to rise by the most since January 2021.
BHP had earlier paid a record US$1.50 a share half-year dividend in March.
The record payout comes when other miners have cut investor returns to contend with declining profits as costs surge. Rival miner Rio Tinto last month reported a 29% drop in first-half profit and more than halved its dividend, citing softening demand from China and supply-chain snags.
BHP’s result comes after the global miner reported record sales from its Western Australian iron ore operations. It helped offset the decline in the steel-making commodity’s prices.
The turnaround in the results from its Queensland coal operations also delivered a US$9.2 billion profit. The bottom line was further boosted by a US$7.3 billion gain delivered through the merger of its oil and gas assets with Woodside earlier this year.
The top miner has benefited as prices of major commodities like copper have hovered near record highs. Coal prices have soared since Russia’s invasion of Ukraine.
But it has warned of a slowdown in advanced economies as rate hikes by major central banks as well as ongoing geopolitical uncertainty and inflationary pressures put pressure on finances. CEO Mike Henry also expects that labour constraints will continue to put pressure on global and local supply chains.
Still, investors are currently focused on the phenomenal payouts by the “Big Australian”.
Including the distribution of Woodside shares following the merger of its petroleum assets – in the form of an “in specie dividend” worth US$3.83 for each BHP share held – BHP has paid a total dividend of US$7.08 to shareholders this year.
BHP shares currently deliver an enormous dividend yield of more than 9.8% thanks to its windfall profits over the last 2 reporting periods.
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