During the last few years, S&P/ASX 200 Index (ASX: XJO) dividend stock Fortescue Ltd (ASX: FMG) has paid some pretty impressive dividends.
The ASX mining share has benefitted significantly over the past six years from the fact the iron ore price has been significantly above the company's own mining costs (which are less than US$20 per tonne of iron ore).
Thanks to a generous dividend payout ratio and a low price/earnings (P/E) ratio, Fortescue has provided investors who bought in January 2019 with a juicy dividend yield and significant cash payments.
However, it should be acknowledged the last 12 months have been difficult for shareholders.
The iron ore price (iron ore fine China import 62% grade) has dropped from around US$140 per tonne at the start of 2024 to approximately US$98 per tonne today, according to Trading Economics. This has seen the Fortescue share price sink by around 37% in the past 12 months.
Mining stocks can experience both feast and famine conditions, depending on fluctuating commodity prices. The share prices of other ASX 200 iron ore miners have also been under pressure over the past year, with BHP Group Ltd (ASX: BHP) and Rio Tinto Ltd (ASX: RIO) down 20% and 12%, respectively.
Getting back to Fortescue dividends, though, at the start of 2019 the company's shares were trading at $4.19. The Fortescue share price more than doubled in 2019, so obviously the dividend yield would be less if investors paid a higher price for the stock. However, this example still provides a great indication of the types of returns that can be achieved with dividends and buying a stock at the right price.
So, let's take a look at how much long-term shareholders have made in dividend payments from Fortescue since the start of 2019.
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First, FY19
For the 2019 financial year, Fortescue experienced an average realised price of US$65 per tonne, leading to the ASX 200 dividend stock generating US$3.2 billion of net profit.
That profit enabled Fortescue to pay dividends per share of A$1.14 in 2019, which was 77.5% of FY19's profit.
Then, FY20
The 2020 financial year was volatile in that came with the impacts of COVID-19. In FY20, the average realised iron ore price was US$78.62 per tonne and Fortescue made net profit of $4.7 billion.
The company paid annual dividends per share of A$1.76 in 2020, which was 77% of net profit.
Next, FY21
The 2021 financial year was an incredible year for the ASX 200 dividend stock. Fortescue achieved an average realised iron ore price of US$135.32 per tonne, making a net profit of US$10.3 billion.
With that huge profit, the company decided to pay an annual dividend per share of A$3.58 in 2021, which was an 80% dividend payout ratio.
After that, FY22
For the 2022 financial year, when the average realised iron ore price was US$99.80 per tonne, Fortescue made US$6.2 billion in net profit and paid an annual dividend per share of A$2.07 in 2022, equating to 75% of net profit.
Then FY23
For the 2023 financial year, when the average realised iron ore price was US$94.74 per tonne, the business made a net profit of US$4.8 billion.
It paid an annual dividend per share of A$1.75 in 2023, representing 65% of net profit.
Finally, FY24
For FY2024, when the average realised iron ore price was US$103.01 per tonne, the company achieved US$5.66 billion in net profit, paying an annual dividend per share of A$1.97 in 2024. This represented a dividend payout ratio of 70%.
Overall payments received from the ASX 200 dividend stock
When you add all these dividends together, since the beginning of 2019, Fortescue has paid total dividends of $12.27. As a reminder, at the start of 2019, Fortescue shares were sitting at $4.19, so you can see the ASX miner has paid enormous cash returns to its shareholders.
But, we should also remember capital growth – Fortescue shares have risen by around 320% since the start of 2019, with a lot of volatility along the way, including the large declines seen during 2024.
The ASX 200 dividend stock may have delivered enormous returns, but success in the next few years may be largely dependent on how the iron ore price performs from here.
