macOS 12.1 here. In the man page for hdiutil there is this example for creating a disk image with a password.
Creating an encrypted single-partition image without user interaction:
printf pp|hdiutil create -encryption -stdinpass -size 9m sp.dmg
This works. It creates a 9MB .dmg file with a password but I don't get to see what the password is. I know the "printf" is supposed to show something but I don't know what the "pp" that follows that does?