Fortescue Ltd (ASX: FMG) is set to deliver a massive dividend payout toward the end of this month. Investors are expecting a payment of 89 cents for every share they own.
But the iron ore giant's founder and executive chairman, Andrew 'Twiggy' Forrest, stands to gain the most.
Thanks to Twiggy's ownership interest in the company he established back in 2003, the Forrest family will pocket a large sum from Fortescue's dividends this year.
Let's take a look.
Fortescue dividends in focus
Fortescue has a reputation for rewarding shareholders with generous dividends, thanks to its strong position in the iron ore market. It is the fourth largest iron ore producer in the world.
This latest dividend comes as the company continues to grow profitability, despite fluctuating iron ore prices.
Profits were up 18% last financial year and hit US$5.6 billion, despite the fact it mined and processed less ore.
This prompted the Board to declare a final dividend of 89 cents per share, equal to 70% of the profits mentioned above.
Fortescue's chairman owns more than 1.13 billion shares in the company, according to The Australian. This brings Twiggy's interest to more than $19 billion in the miner.
But with the final dividend payment, due on September 27, Forrest – combined with his wife Nicola – will pocket over $1 billion in cash from Fortescue dividends.
This is equal to a 5% cash yield on his equity position in Fortescue.
When you stop to think about that for a second, it hammers in the importance of a long-term mindset.
Is Fortescue's dividend sustainable?
Fortescue's trailing dividend yield stands at 11.2% at the time of writing.
This is high, but it's crucial to understand that this yield is tied to iron ore prices – and Fortescue share prices – both of which can be volatile.
According to my colleague Seb, this year's dividends include a $1.08 per share interim dividend and an 89 cents per share final dividend, for a total of $1.97.
While this suggests strong cash flows, it's also a reminder that the mining sector's fortunes are closely linked to commodity price fluctuations.
Consequently, there is no guarantee this level of payment will be maintained into the future.
If iron ore prices remain robust, Fortescue's yield could stay attractive. Conversely, if prices fall, the yield might not be as enticing as it appears today. Only time will tell.
For now, its chairman is set to pocket some serious cash from the miner's dividend.
Foolish takeaway
Chairman Andrew Forrest is set to gain handsomely from Fortescue dividends this year. Peeling it all back, this reminds us all of the importance of staying invested for the long term.
Fortescue shares are down 19% in the past year.
