Fortescue Metals Group Ltd (ASX: FMG) shares are popular among investors not just for their potential share price appreciation, but also for the passive income the stock provides.
Fortescue paid a final dividend of $1.21 per share on 29 September. The S&P/ASX 200 Index (ASX: XJO) iron ore stock paid its interim dividend of 75 cents per share on 29 March. That brings the total dividend payout over the past 12 months to $1.96 per share.
At the current share price of $20.775, Fortescue trades on a trailing yield of 9.47%, fully franked.
That means if you'd bought $1,000 worth of Fortescue shares 12 months ago, the stock would have already delivered $94.70 in dividend income.
That's because the share price a year ago was quite close to what it is currently.
But what if via good luck – or better yet, sound investment advice – you'd bought Fortescue shares at the recent lows in July?
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Investing on the dip
I know timing the market is no easy feat. And no one will get it right every time.
Sometimes trying to buy in at the dip is akin to catching the old falling knife.
But other times – especially with quality, blue-chip stocks – a share price retrace can present an excellent buying opportunity.
And it can result in significantly higher personal dividend yields for as long as you hold onto the stock.
Which brings us back to Fortescue shares.
The iron ore miner suffered a few stretches of share price weakness over the past year, largely driven by declining iron ore prices at those times.
Early July marked one such period.
On 15 July, FMG closed the day at $16.33 per share.
If you'd bought shares at close on the day, you'd have been eligible for both the final and interim dividend payments. And your stock holdings would be trading on a yield of 12%.
That means your $1,000 investment would already have returned $120 in passive income. And in only nine months!
Sweetening the deal, Fortescue shares have also gained 32% over that time, adding another $320 to the profit line.
How have Fortescue shares been tracking?
As you can see in the chart below, the Fortescue share price is trading fairly close to where it was 12 months ago. Though this doesn't include the dividend payments.
However, shares in the iron ore miner are currently down 3.3% in a tough trading day after Fortescue released its quarterly production results this morning.
Longer-term, the ASX 200 miner's share price has gained more than 360% over five years.
