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Fortescue shares sink on falling iron ore price

The Fortescue Metals Group Limited (ASX: FMG) share price tumbled 5.5% to $9.03 today, but is still up around 115% plus substantial fully franked dividends over the past year. 

The stock is down after the iron ore price dropped to around US$80 a tonne on Friday according to data provider Market Index. The red metal’s price movements are nearly always related to swinging levels of Chinese demand with Fortescue and other miners like BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO) reliant on continually strong construction activity in China. 

For the financial year ending June 30 2019 Fortescue posted a record net profit of US$3.2 billion, which was nearly triple the prior year’s amount. Total dividends climbed an even more impressive 396%. 

The miner was largely built on debt by its risk-taking founder Andrew Forrest, which meant more conservative investors avoided it given the risks. However, net debt now stands at just US$0.5 billion with the deleveraged balance sheet another reason investors are piling in.

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Motley Fool contributor Tom Richardson owns shares of Dicker Data Limited.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia owns shares of and has recommended Dicker Data Limited. 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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