The Fortescue Metals Group Limited (ASX: FMG) dividend has been significantly slashed following the company's FY22 half-year results today.
At the time of writing, the mining giant's shares are down 1.95% to $21.17 apiece.
Below, we take a look at the main drivers behind the company's decision to reduce its interim dividend.
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Fortescue shares slip following first-half results
The release of Fortescue's financial scorecard has prompted investors to sell down the company's shares.
For the six months ending 31 December, Fortescue exported a half-year record of 93.1 million tonnes of iron ore, up 3% on H1 FY21 volumes. This was supported by the integration of the Eliwana mine and rail project into the company's value chain.
However, a reduction in demand and declining iron ore prices, combined with increased supply, impacted the price the company could charge for its product. As a result, Fortescue reported average revenue of US$96 per dry metric tonne (dmt), down from US$114/dmt in H1 FY21.
Total revenue came to US$8.1 billion, a 13% slump caused by large discounts applied to its lower grade ore. The company received around 70% of the benchmark price for iron ore given when sold to Chinese steel mills.
This led to the board declaring a decreased interim dividend for the back-end of the year.
As such, eligible investors will receive a fully franked dividend of 86 cents per share, down almost 42% from H1 FY21. The $973 million payout was broadly in line with analyst estimates, which had forecast a US$2.7 billion half-year profit along with an 85.8 cents interim dividend.
This means the market was pretty much already expecting a much lower dividend given the external factors impacting Fortescue's results.
Last year, the mining giant declared a record interim dividend of $1.47 per share on the back of several positive factors. These included a robust operating cash flow environment, a confident outlook for the second half of FY21, and a strong balance sheet.
Fortescue today stated it generated earnings per share (EPS) of 90.3 US cents in H1 FY22. This compares with 132.7 US cents EPS in the prior year.
The latest interim dividend represents a 70% payout of the first half net profit after tax (NPAT). This is in line with the company's policy of maintaining a payout ratio between 50% and 80% of full-year NPAT.
Fortescue dividend key dates
Fortescue provided the distribution amount and payment dates of its interim dividend for the 2022 financial year. Here's a summary of the important dates Fortescue shareholders will need to know.
Ex-dividend date
The ex-dividend date will be 28 February 2022.
This is the date where investors must own Fortescue shares. Should you sell your Fortescue holdings before the ex-dividend date, you will not receive the upcoming dividend.
However, if you sell your shares on or after this date, you will still receive the dividend. Typically on the ex-dividend rate, the share price falls in proportion to the dividend yield.
Payment date
The payment date for Fortescue's dividend will be 30 March 2022.
This is when shareholders can expect to see their nominated accounts credited with the allocated interim dividend payment.
