If you're investing in ASX shares for passive income, you may have heard about the sizeable cut to the latest Fortescue Ltd (ASX: FMG) dividend.
Management announced the reduced payout yesterday when the S&P/ASX 200 Index (ASX: XJO) miner reported its half-year results (H1 FY 2025).
With profits taking a big hit amid rising costs and lower realised prices for its iron ore, investors reacted by sending the Fortescue share price down 6.2% on Thursday.
Fortescue shares are regaining some of that lost ground today, up 1.4% to $18.50 in early afternoon trade.
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Here's what's happening with the slashed Fortescue dividend
Yesterday, passive income investors learned that the interim Fortescue dividend payout would be 53.7% lower than last year's interim dividend.
The board declared a fully franked interim dividend of 50 Aussie cents a share, down from $1.08 a share in H1 FY 2024.
Commenting on the interim payout, Fortescue Metals CEO Dino Otranto said:
In line with our commitment to deliver returns to shareholders, the board has today declared a fully franked interim dividend of A$0.50 per share, representing a 65 per cent payout of first half net profit after tax.
That's also in line with the ASX 200 miner's dividend policy to pay out 50% to 80% of its full-year underlying net profit after tax (NPAT).
And therein lies the big passive income cut.
Despite achieving record half-year iron ore shipments of 97.1 million tonnes, up 3% year on year, Fortescue's revenue of US$7.6 billion was down 20%. And underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) of US$3.6 billion were down 38% year on year.
On the profit front, NPAT of US$1.6 billion plunged 53% from 1H FY 2024, resulting in a similar dividend cut.
If you're hoping to bag the latest Fortescue dividend, you'll need to own shares at market close next Tuesday, 25 February. The ASX 200 mining stock trades ex-dividend on 26 February.
You can then expect that passive income to hit your bank account on 27 March.
Or, if you prefer to reinvest those dividends rather than bank them, the miner's dividend reinvestment plan (DRP) is active.
Despite the sizeable reduction, the interim Fortescue dividend will return $1.5 billion to shareholders.
What kind of yield are Fortescue shares now offering?
At the beginning of the week, Fortescue shares were highly attractive to passive income investors, trading at a fully franked trailing yield of 10.4%.
Factoring in the slashed interim Fortescue dividend, the ASX 200 mining stock now trades at a fully franked dividend yield (part trailing, part pending) of 7.4%.
As for what kind of passive income investors can expect ahead, much of that will depend on the trajectory of iron ore prices.
