Today is a good day for Fortescue Metals Group Ltd (ASX: FMG) shareholders for a couple of reasons.
The first is that the Fortescue share price is rising 1.5% to $20.89 this morning. That's despite the market edging lower.
The second is that it is payday for eligible shareholders, with the Fortescue dividend hitting bank accounts today.
The Fortescue dividend
Last month, the iron ore giant released its half-year results. It reported a 3.6% decline in revenue to US$7.84 billion. This reflects softer iron ore prices, which offset the miner's record-breaking shipments.
It was the same for Fortescue's earnings, with underlying earnings before interest, tax, depreciation and amortisation (EBITDA) falling 8.7% to US$4.35 billion.
As you might have guessed, this put pressure on the Fortescue interim dividend and led to the miner's board cutting it by 13% to a fully franked 75 cents per share.
This represented a 65% payout ratio, which is consistent with Fortescue's dividend policy of paying out 50% to 80% of its profits to shareholders.
And while a dividend cut is always disappointing, it is worth noting that this still equates to an above-average dividend yield of 3.6%. And that's before the final dividend is even paid!
What's next?
According to a note out of Bell Potter, its analysts expect an even larger dividend to be paid in the second half.
The broker has pencilled in a fully franked final dividend of 148.8 cents per share, which brings the full-year Fortescue dividend to 223.8 cents per share. This represents a massive full-year yield of 10.7%.
However, it is worth noting that Bell Potter isn't recommending investors buy its shares. It currently has a sell rating and $14.45 price target on them, which suggests potential downside of 30%.
