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.
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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%.
