Here is the dividend forecast to 2028 for Fortescue shares

The potential dividend payments from Fortescue could surprise you.

| More on:
Miner looking at a tablet.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Owning Fortescue Ltd (ASX: FMG) shares has been a rewarding experience in the last few years because of the dividend payments.

The supportive iron ore price, the generous dividend payout ratio and the low price/earnings (P/E) ratio combined to deliver large dividend yields year after year.

Can this attractive dividend streak continue, or could the rest of the decade be much leaner for Fortescue shareowners? Let's take a look at what one financial institution has forecast for the ASX iron ore share.

FY24 dividend payment for Fortescue shares

We're more than three-quarters through the 2024 financial year, and Fortescue has already paid an interim dividend of A$1.08 per share for FY24.

The iron ore price remaining above US$100 per tonne, is supportive for the company's profitability and its dividend payments. Fortescue had a dividend payout ratio of 65% in the first half of FY24.

The iron ore price has fallen to under US$110 per tonne in the last couple of months, so the second-half dividend may be lower than the first half.

The broker UBS currently projects an annual dividend per share of A$1.89, which translates into a grossed-up dividend yield of 11%.

FY25

If the iron ore price can continue to remain above US$100 per tonne, it could enable Fortescue to generate a strong enough profit to pay a pleasing dividend and invest in its green energy benefits.

According to the estimates from UBS, Fortescue's annual dividend per share is expected to reduce to A$1.47 per share, which translates into a grossed-up dividend yield of 8.6%. That's a pretty good yield considering the Fortescue share price is up more than 10% in the last six months as we can see on the chart below.

FY26

The iron ore price could become challenged in future years if some market commentary is right. We may already have seen the peak iron demand from China, and iron ore production from Africa is expected to rise.

UBS is currently estimating that FY26's net profit could be a third lower than FY24. This could lead to the annual dividend per share being cut to A$1.08 per share – 43% lower than FY24's projected payout. The FY26 full-year payout is projected to be as large as the FY24 interim dividend alone.

An A$1.08 annual dividend per share would translate into a grossed-up dividend yield of 6.3%.

FY27

The FY27 profit and Fortescue dividend could take another hit in FY27, though its green energy efforts will likely be ramping up by that stage.

Broker UBS has projected that owners of Fortescue shares could receive 86 cents per share in the 2027 financial year. If that's correct, it'd translate into a grossed-up dividend yield of 5% at the current Fortescue share.

FY28

The 2028 financial year could be the worst of all of these years based on these estimates from UBS.

FY28 could see Fortescue generate net profit after tax (NPAT) of US$3.77 billion, which is 45% lower than the projected amount for FY24. That could lead to the annual dividend per share dropping to A$0.82, translating into a grossed-up dividend yield of 4.8%.

Foolish takeaway

Analysts have regularly been shown to be too pessimistic about the iron ore price and, therefore, what Fortescue may be able to achieve. Time will tell if these projections are close to reality, but it seems UBS thinks leaner times are ahead.

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.

More on Resources Shares

Miner looking at a tablet.
Resources Shares

ASX 200 mining stocks flying higher on 'most relaxed' Chinese stimulus ever

BHP, Fortescue and Rio Tinto shares could all benefit from China’s new stimulus measures.

Read more »

A man closesly watch a clock, indicating a delay or timing issue on an ASX share price movement
Mergers & Acquisitions

BHP shares charging higher as the clock ticks down on the Anglo American takeover

BHP has less than three days before the clock runs down on its $64 billion Anglo American takeover bid.

Read more »

Mining workers in high vis vests and hard hats discuss plans for the mining site they are at as heavy equipment moves earth behind them, representing opportunities among ASX 200 shares as nominated by top broker Macquarie
Resources Shares

2 of the best ASX mining stocks to buy now

Analysts have good things to say about these miners.

Read more »

A woman in hammock with headphones on enjoying life which symbolises passive income.
Dividend Investing

Buy 300 shares in this glorious ASX 200 dividend stock and create almost $2,000 in passive income

Atop the juicy passive income, I like this ASX dividend beauty for its potential share price gains.

Read more »

A woman sits at her computer with her chin resting on her hand as she contemplates her next potential investment.
Resources Shares

Up 51% from their 52-week low, is it too late to buy Mineral Resources shares?

Mineral Resources has been on a tear since mid-January. Do these top brokers think it's too late to buy?

Read more »

Three satisfied miners with their arms crossed looking at the camera proudly
Resources Shares

ASX 200 mining shares charging higher amid China's $210 billion cash injection

The big three ASX 200 miners are charging higher on Friday even as the benchmark sinks.

Read more »

Two excited mining workers in yellow high vis vests and hardhats shake hands to congratulate each other on a mineral discovery
Resources Shares

What this unprecedented short squeeze signals for ASX copper stocks

ASX copper stocks have been benefiting from soaring demand for the red metal amid limited new supplies.

Read more »

Female miner standing next to a haul truck in a large mining operation.
Resources Shares

What's the outlook for ASX iron ore shares after the federal budget?

There may be trouble ahead for the iron ore price according to broker Citi.

Read more »