Over the last few years, Fortescue Metals Group Ltd (ASX: FMG) has been one of the biggest dividend payers on the Australian share market.
Thanks to a combination of strong demand for its iron ore in China and its growing production, the mining giant has been able to return billions to shareholders in the form of dividends.
This has made Fortescue shares a great source of passive income during this time. But will that be the case in the future now that the company is looking to shift from being one of the world's biggest greenhouse gas emitters to a green energy juggernaut?
Let's take a look to see what passive income could be generated from a $10,000 investment in Fortescue's shares when the market reopens.
Generating passive income from Fortescue shares
On Friday, the Fortescue share price ended the week at $21.06. This means that if you were to invest $10,000 into the mining giant, you would end up owning 475 units.
The broker community remains divided on the Fortescue dividend, so we're going to have a couple of scenarios laid out on this occasion.
For example, analysts at Morgan Stanley are forecasting a fully franked $2.47 per share dividend in FY 2024. This represents a mammoth 11.7% dividend yield at current prices.
This means that your $10,000 investment in Fortescue's shares would yield $1,170 if Morgan Stanley is on the money with its estimate.
Looking ahead to FY 2025, the broker is expecting a dividend cut to $1.51 per share. While this is a reduction of approximately 39%, it still equates to a generous yield of 7.15%. This would mean further passive income of $715 from its shares for that year.
Goldman's take
Goldman Sachs isn't as optimistic on the Fortescue dividend. It is expecting a cut to 54 US cents (85 Australian cents) per share in FY 2024. This would mean a dividend yield of 4% and generate passive income of $400 from a $10,000 investment.
The broker is then forecasting another cut to 36 US cents (57 Australian cents) per share in FY 2025. This would mean a yield of 2.7% and a passive income of just $270.
Quite a contrast to Morgan Stanley's estimates!
