Fortescue Metals Group Ltd (ASX: FMG) shares have come under heavy selling pressure in 2024, which I believe makes now a great time to buy the S&P/ASX 200 Index (ASX: XJO) mining stock to secure a long-term passive income stream.
The miner first jumped onto passive income investors' radars around five years ago when the company's fully franked dividend payouts began to outpace many rival income stocks.
Now, the Fortescue share price is down almost 31% year to date, closing yesterday at $20.35. That's come amid a falling iron ore price, a pullback from the company's green hydrogen ambitions, and concerns over the costs of some of its growth projects.
Of course, the share price could slip further from here, or it may have bottomed. Either way, for long-term investors seeking market-beating passive income, I think the past six months' pullback could represent an opportune entry point.
We'll look at the past year's payouts and what Fortescue shares currently yield below.
But first…
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Uncertainty and risks
While we look at only one ASX 200 income stock here, a properly diversified portfolio will contain a basket of stocks operating across different sectors and geographic locations. That kind of diversity will help to lower the risk of my passive income stream taking a big, unexpected hit if any single company or sector comes under pressure.
Also, note that the yields you generally see quoted are trailing yields. Future yields may be higher or lower depending on a range of company-specific and macroeconomic factors.
With that said…
Mining Fortescue shares for $1,000 a month in passive income
If I'd held Fortescue shares over the past full calendar year, I would have received the final, fully franked dividend of $1.00 a share on 28 September.
I'd then have banked the fully franked interim dividend of $1.08 a share on 27 March. That payout was up 44% from the ASX 200 miner's prior interim dividend.
All up, that equates to a full-year passive income payment of $2.08 a share, with potential tax benefits from those franking credits.
At yesterday's closing price of $20.35, that equates to a juicy, fully franked trailing yield of 10.22%.
So, to earn $1,000 a month in passive income or a very tidy $12,000 a year, I'd need to buy 5,770 Fortescue shares today.
Now, that's admittedly a sizeable investment to make in one go.
But that's okay.
I can also buy a smaller allotment of shares every month or so, and in good time I'll achieve my passive income goal.
It's also worth remembering that despite the big retrace in 2024, Fortescue shares have gained 166% over the past five years. And that's not including the ASX 200 miner's two annual dividend payments.
As always, if you're intending to buy Fortescue shares or any other ASX stocks for passive income, make sure to do your own research first.
Or just reach out for some expert advice.
