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The Fortescue share price is up 140% in 12 months

The Fortescue Metals Group Limited (ASX: FMG) share price is trading slightly lower at $9.00 on the day of its annual general meeting.

Not that shareholders at the event will mind. After all, since this time last year the iron ore producer’s shares have rallied an incredible 140%.

Why is the Fortescue share price up 140% in 12 months?

The main catalyst for Fortescue’s massive share price gain has been a rapid rise in the price of iron ore. Due to strong demand in China and supply disruptions in Australia and Brazil, iron ore prices have been at sky high levels in 2019.

It was thanks to these high prices and Fortescue’s low costs, that the company reported record underlying EBITDA of US$6 billion and record underlying NPAT of US$3.2 billion in FY 2019.

This was a sizeable 90% and 195% increase, respectively, on the prior corresponding period.

As with both BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO), Fortescue elected to return the majority of its free cash flow to shareholders.

In fact, over the last 12 months Fortescue has paid out a total of $1.14 per share in dividends. This is the equivalent of a fully franked 12.5% dividend yield based on its current share price. Or if you were lucky enough to buy shares a year ago, it would be a staggering yield on cost of 29%.

Is it too late to buy Fortescue shares?

Whilst it is unlikely that Fortescue will be able to repeat this success over the next 12 months, I still feel they have the potential to be market-beaters. Just as long as iron ore prices remain at favourable levels.

I’m not alone in thinking this. Equity analysts at Macquarie Group Ltd (ASX: MQG) recently slapped an outperform rating and $10.30 price target on its shares. It also expects a dividend of 89.9 cents.

Combined, this implies a potential total return of ~24% for its shares over the next 12 months.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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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