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Fortescue paid a 13% yield in 2019 & has a plan to send its share price higher in 2020

The Fortescue Metals Group Limited (ASX: FMG) share price is up an incredible 130% over just the past year as the iron ore miner handed out $1.14 per share in fully franked dividends over the period.

On that basis alone it offers a trailing yield of 13% at today’s share price of $8.80. 

Thanks to the rising iron ore price generating mountains of free cash flow for Fortescue over fiscal 2019 it has also been able to buy back around 34.8 million shares for $140 million since October 2018.

Today it announced plans to buy back up to another $500 million worth of shares over the next 12 months depending on market conditions and the iron ore price for example. 

Whether a cyclical miner should be in the market buying back shares at all time highs when it has US$4 billion of gross debt on its balance sheet around 1.25x fiscal 2019’s profit is up for debate. 

However, in fairness Fortescue’s management built its business on a mountain of debt and it has always been a risk taking business that has succeeded despite the doubters.

As such investors in the stock can continue to expect a bumpy ride. 

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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