Is the Fortescue share price predicted to rise in June?

We look at what’s in store for the big iron ore miner this month.

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Key points

  • Brokers have evaluated whether they think the Fortescue share price is an opportunity
  • The miner is expecting to reveal large iron ore shipments in FY22
  • FY22 is expected to be another big year of dividends

The Fortescue Metals Group Limited (ASX: FMG) share price has seen quite a lot of volatility in 2022. But could the business see gains in June?

The company’s shares have been on an upward trajectory over the last week and have seen a rise of approximately 20% over the past six months.

But what’s next?

End of FY22

June 2022 marks the end of the current financial year. This is the last month for the business to make a difference to its operational and financial results.

The ASX mining share giant recently upgraded its iron ore shipment guidance for FY22 to be between 185Mt (million tonnes) to 188Mmt. This was up from previous guidance of between 180Mt to 185Mt.

However, the company also increased its expectations of C1 costs (mining costs) to a range of US$15.75 to US$16 per wet metric tonne (wmt), up from the previous guidance of US$15 to US$15.50 per wmt.

The final bit of guidance that Fortescue provided was that it would be spending between US$3 billion to US$3.2 billion on capital expenditure, excluding Fortescue Future Industries (FFI). That was a decrease from previous expectations of between US$3 billion to US$3.2 billion.

What are the prospects for the Fortescue share price?

Sentiment about Fortescue shares can change quite quickly as the iron ore price changes.

There are brokers that have put price targets on the Fortescue share price – that’s where the broker thinks the Fortescue share price will be in 12 months. But no one has a working crystal ball that will tell what the iron ore price or Fortescue share price will do this month or this year.

Ord Minnett recently said in a note that it thinks Fortescue shares are a ‘hold’, with a price target of $19. That implies a high single-digit decline over the next year.

Another recent rating from the broker Macquarie is ‘neutral’, with a price rating of $20. That also suggests a slight decline over the next year.

But one of the things Macquarie liked was the ongoing strength of the iron ore price. Considering Fortescue is allocating 10% of its net profit after tax (NPAT) to the green industrial business called FFI, the strong iron ore price will help Fortescue with its decarbonisation efforts.

Fortescue has appointed a number of people for the FFI business to give it a strong management team.

How big is the Fortescue FY22 dividend expected to be?

Ord Minnett has predicted that the Fortescue grossed-up dividend yield could be 14.2% for FY22.

Meanwhile, Macquarie has projected that the Fortescue grossed-up dividend yield might be 14.1%.

However, both brokers are expecting a dividend reduction in FY23.

Ord Minnett has pencilled in a grossed-up dividend yield of 12.3% in the next financial year.

However, Macquarie isn’t sure whether Fortescue will be able to maintain such a high dividend ratio while investing in its green efforts.

That’s why Macquarie is only expecting a grossed-up dividend yield of 8% from Fortescue in FY23.

Fortescue share price snapshot

Since the start of 2022, Fortescue shares have risen by 8%.

Motley Fool contributor Tristan Harrison has positions in Fortescue Metals Group Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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