Owning Fortescue Ltd (ASX: FMG) shares has been a very rewarding experience when it comes to passive income over the last several years. It has delivered huge dividends thanks to the strength of the iron ore price.
Fortescue is now one of the purest ways to invest for exposure to the iron ore industry. These days, BHP Group Ltd (ASX: BHP) and Rio Tinto Ltd (ASX: RIO) both have large copper operations, which gives investors useful diversification.
Nearly all of Fortescue's value is related to iron ore, and the upcoming dividends will be quite dependent on what happens with the resource price.
We're going to take a look at what's forecast for the FY27 Fortescue dividend.
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Dividend projection
In FY26, the company reported revenue growth of 9% to US$17 billion, underlying operating profit (EBITDA) rose 9% to US$8.6 billion, operating cash flow improved 6% to US$6.8 billion, free cash flow jumped 25% to US$3.2 billion, underlying net profit after tax (NPAT) grew 3% to US$3.46 billion, and in Australian dollar terms, underlying earnings per share (EPS) only declined by 2% to A$1.66.
That led to the business reducing its annual dividend per Fortescue share by 2% to A$1.08, while keeping the dividend payout ratio at 65%.
The forecast on Commsec suggests a significant decline in the earnings and dividend in the 2027 financial year.
That projection shows EPS could drop to $1.32, which is expected to lead to a fall in the dividend. The estimate on Commsec suggests the annual payout could reduce to 84.6 cents per share, a cut of 22% compared to the FY26 level.
That projected amount suggests the business could pay a dividend yield of 5.2% excluding franking credits and 7.4% including franking credits.
What would a $6,000 investment in Fortescue shares unlock in dividends?
The Fortescue share price is now a lot cheaper, it has dropped 26% this year. When share prices fall, the dividend yield gets a boost. So, prospective investors could still get an appealing dividend yield due to the decline in the Fortescue share price.
Buying $6,000 of the ASX mining share would allow an investor to buy 366 Fortescue shares, with a little bit of change left. If Fortescue does pay that projected amount of 84.6 cents, then it would create $309.64 dividend cash and $442.34 overall income, including franking credits.
Analysts are, overall, quite neutral on the business. According to Commsec, there are currently two buy ratings on the business, 10 hold ratings and four sell ratings. Therefore, it looks like other ASX shares could be better opportunities to buy.
