The Fortescue Metals Group Limited (ASX: FMG) share price has been out of form recently.
Due to a pullback in iron ore prices, the mining giant's shares have lost approximately 6% of their value since this time last week.
Is this a buying opportunity?
According to a note out of Bell Potter from last week, Fortescue's shares could be worth a look if you're an income investor. This is because its analysts are forecasting massive dividend yields in FY 2021 and FY 2022.
Bell Potter currently has a hold rating and $23.96 price target on the iron ore producer's shares. With the Fortescue share price fetching $21.72 today, this still implies potential upside of 10% over the next 12 months.
That return alone is attractive but if you throw in dividends, things get even better. Bell Potter is forecasting fully franked dividends of $5.40 per share in FY 2021 and then $4.12 per share in FY 2022.
Based on the current Fortescue share price, this represents massive yields of ~25% and then ~19%, respectively.
What did Bell Potter say?
Bell Potter believes the sky high iron ore price has put Fortescue in a position to reward shareholders with bumper dividends.
It explained: "The extraordinary iron ore price action we have continued to see through the June quarter has prompted us to further refine our financial performance forecasts for FMG as we head towards the end of FY21. Marking-to-market the iron ore price for the June 2021 quarter to date shows the average price now sits at ~US$184/dmt."
"This compares with our previous forecast of US$160/dmt and the current spot price [21 May] of US$212.90/dmt. This lifts our 2HFY21 forecast to US$179/t, up 9% from US$164/dmt previously. Our higher forecast iron ore price flows through to modest earnings and dividend increases. It is partially offset by a higher AUD:USD forecast and the slightly higher costs reported in the March 2021 quarterly."
