Owning Fortescue Ltd (ASX: FMG) shares has been very rewarding for passive income over the last five years, as the ASX mining share has made the most of iron ore price strength at various times.
As an ASX iron ore share, the company has a lot of operating leverage when the commodity price rises.
Production costs don't typically change much month to month, so a rise in the iron ore price can boost revenue, and most of that can flow straight into the net profit. However, the reverse can be true when iron ore prices fall.
Fortescue can control how much iron ore it produces, but it has little control over what happens with the iron ore price. Let's take a look at what analysts think could happen with the Fortescue dividend in FY27.
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Dividend projection for FY27
Forecast payments are not guarantees for shareholders. The dividend could be better than projected. It could also be lower than expected.
But given the current iron price and forecasts, analysts are predicting that the FY27 payout will be lower than the annual payment for the 2026 financial year.
In FY26, Fortescue grew revenue by 9% to US$17 billion, underlying EBITDA (EBITDA explained) grew by 9% to US$5.6 billion, and underlying net profit after tax (NPAT) rose 3% to US$3.45 billion.
However, due to foreign currency fluctuations, the underlying earnings per share (EPS) fell by 2% in Australian dollar terms to A$1.66. This led to a 2% reduction in the full-year dividend to A$1.08 per share.
According to the projection on Commsec, owners of Fortescue shares could see the annual dividend payment decline to AUD 85.9 cents in FY27.
At the time of writing, that potential payout translates into a dividend yield of 4.8% excluding franking credits and 6.8% including franking credits.
Let's see what would happen if someone invested $15,000 into Fortescue shares.
Potential payout with $15,000 invested in Fortescue shares
At the time of writing, an investor would be able to buy 836 Fortescue shares with $15,000.
Assuming the ASX mining share does deliver the projected payout, then owning 836 Fortescue shares could possibly deliver A$718 cash and another A$307.77 of franking credits for a combined total of around $1,026 of grossed-up dividend income, including the franking credits.
Is this the right time to invest? Analysts seem mixed on the business. According to Commsec, there are currently seven sell ratings on the business, eight hold ratings and two buy ratings.
Overall, experts are leaning more negative than positive, so it could be a good idea to consider other ASX share ideas.
