Insights

Here’s the Fortescue dividend forecast through to 2024

Where next for the Fortescue dividend?
The post Here’s the Fortescue dividend forecast through to 2024 appeared first on The Motley Fool Australia. –

The Fortescue Metals Group Limited (ASX: FMG) dividend has been a favourite of income investors in recent years.

Thanks to sky high iron ore prices, the mining giant has been rewarding shareholders handsomely with payouts.

But will this continue in the future? Let’s take a look at one leading broker is forecasting for the Fortescue dividend through to FY 2024.

Where is the Fortescue dividend heading?

Unfortunately, the team at Goldman Sachs believe that the Fortescue dividend is now on a downward trajectory.

In FY 2021, the company paid shareholders a fully franked A$3.58 per share dividend. This was double the A$1.76 per share dividend that it rewarded shareholders with a year earlier in FY 2020.

Unfortunately, Goldman Sachs is expecting the Fortescue dividend to be back down to almost 2020 levels in FY 2022.

It is forecasting a fully franked US$1.29 (A$1.85) per share dividend this year. Though, it is worth noting that this will still be an above average yield. Based on the current Fortescue share price of $18.25, this will mean a fully franked yield of 10.1%.

What’s next?

Goldman is expecting the dividend cuts to continue in FY 2023. It is expecting the Fortescue dividend to be reduced to 73 US cents (A$1.05) per share. This would mean a fully franked dividend yield of 5.75% for investors.

The cuts are expected to continue in FY 2024, with the broker forecasting a further decline to 42 US cents (60 Australian cents) per share for that financial year.

Based on the current Fortescue share price, this will mean a fully franked dividend yield of approximately 3.3% in FY 2024.

Why the cuts?

As well as forecasting a softening benchmark iron ore price from an average of US$120 per tonne in 2022 to US$80 per tonne in 2024, the broker believes Fortescue’s decarbonisation plans and the Fortescue Futures Industries business will weigh on its free cash flow.

Goldman commented:

We think decarbonising the Pilbara could cost FMG over US$7bn and requires +US$50/t carbon or a green premia to be NPV positive. FMG has outlined that the Pilbara decarbonisation project/assets would logically sit within FFI (although ultimately under a Power Purchasing Agreement (PPA) which would still be reflected on FMG’s balance sheet). In order to fund FFI projects, we think FMG will need to reduce their dividend payout ratio from 80% to 50% from 2022 onwards.

The broker has a sell rating and lowly $13.20 price target on the Fortescue share price.

The post Here’s the Fortescue dividend forecast through to 2024 appeared first on The Motley Fool Australia.

Should you invest $1,000 in Fortescue Metals Group Limited right now?

Before you consider Fortescue Metals Group Limited, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Fortescue Metals Group Limited wasn’t one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

See The 5 Stocks
*Returns as of July 7 2022

setButtonColorDefaults(“#43B02A”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43B02A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

Here are the top 10 ASX 200 shares today
Why is the Fortescue share price climbing today?
How might China’s $6b Mineral Resources Group impact the iron ore price?
What’s going wrong for the Fortescue share price on Thursday?
Why did the Fortescue share price leap 5% on Wednesday?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

  • This field is for validation purposes and should be left unchanged.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Rebate Rewards

Level 2 Rebate

Deposit $2,000 and get $200 Rebate
$ 200 Rebate
  • 3 Simple Steps
  • 1. Register Using The Link Below (Promo-Code: WEBREBATE)
  • 2. Deposit $2,000 and place one trade at any non-Austalian market within 30 calendar days
  • 3. Receive Your $200 Rebate
Popular

Level 1 Rebate

Deposit $1,000 and get $100 Rebate
$ 100 Rebate
  • 3 Simple Steps
  • 1. Register Using The Link Below (Promo-Code: WEBREBATE)
  • 2. Deposit $1,000 and place one trade at any non-Austalian market within 30 calendar days
  • 3. Receive Your $100 Rebate

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex Securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

EASY QUALIFICATION & LOW ENTRY
NEW CLIENT REBATE OFFER
EARN UP TO $200 CASH REBATE
Act Fast - Promotion Ends In
Click Here To Get Started
EASY QUALIFICATION & LOW ENTRY
NEW CLIENT REBATE OFFER
EARN UP TO $200 CASH REBATE
Act Fast - Promotion Ends In
Click Here For More Info