Over the last few years, the Fortescue Metals Group Limited (ASX: FMG) dividend has been among the most generous on the Australian share market.
This has been underpinned by the significant free cash flow the mining giant has been generating thanks to strong iron ore prices.
But after a couple of decades of polluting the earth, Fortescue is now focusing on green energy as well as iron ore.
Given the high level of investment required for these new activities, investors may be wondering what this means for the Fortescue dividend in FY 2023. Let's take a look at what one leading broker is expecting from the miner.
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How big will the Fortescue dividend be in 2023?
According to a note out of Goldman Sachs, its analysts are expecting an almighty cut to the Fortescue dividend in the next 12 months.
The broker expects Fortescue to go from paying a US$1.50 per share dividend in FY 2022 to an 80 US cents per share dividend in FY 2023. That's a cut of 47% year over year.
Based on current exchange rates and the latest Fortescue share price of $17.78, this would mean a fully franked yield of 6.6% for investors in 2023. Not quite the bumper yields that investors have been accustomed to in recent years.
All in all, the broker appears to believe the Fortescue dividend has now peaked and is on a downward trajectory from here. It commented:
We continue to think FMG is at an inflection point on capital allocation, and to fund the ambitious new strategy, we assume the dividend payout ratio falls from the current ~75% in FY22 and then to ~50% from FY24 onwards.
