Everything you need to know about the supersized Fortescue dividend

It's boom time for Fortescue shareholders.

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The Fortescue Ltd (ASX: FMG) dividend has been supercharged after a big jump in profitability in its FY24 first-half result.

As a major ASX iron ore share, Fortescue's profitability has benefitted from an increase in the iron ore price. Average revenue per dry metric tonne (dmt) has jumped 24% to US$108.19, helping Fortescue's revenue rise by 21% to US$9.5 billion. This led to net profit after tax (NPAT) growth of 41% to US$3.34 billion.

Big increase to the Fortescue dividend

Fortescue's board has boosted the interim dividend by 44% to A$1.08 after a 44% rise in earnings per share (EPS) to A$1.66. This translates to a dividend payout ratio of 65%, so Fortescue is keeping approximately a third of its net profit within the business.

The company's dividend policy is to pay between 50% to 80% of full-year of underlying NPAT to shareholders.

At the current Fortescue share price, the declared dividend has a cash yield of 3.9% and a grossed-up dividend yield of 5.6%.

Ex-dividend date

The ex-dividend date is an important one for investors who want the upcoming payment. Interested investors must own Fortescue shares before the ex-dividend date, otherwise they'll miss out on the payment.

Fortescue's nominated ex-dividend date is next Wednesday, 28 February. This means investors will need to own shares by the end of trading on Tuesday to gain the dividend.

It will be paid on 27 March 2024 — just over a month away, so investors won't have long to wait.

The company's balance sheet has improved materially since June 2023. This includes a 45% improvement of net debt to $569 million, following free cash flow of US$2.66 billion over the period.

Fortescue share price snapshot

Despite today's rise, Fortescue shares are down more than 5% in 2024 to date.

Motley Fool contributor Tristan Harrison has positions in Fortescue. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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