Of all the ASX 200 miners, here’s why I decided to buy Fortescue shares

Fortescue Metals Group Limited (ASX: FMG) is the only S&P/ASX 200 Index (ASX: XJO) mining share that I have invested in.

It is one of the biggest miners in Australia. Though its size isn’t what attracted me to one of the country’s leading ASX iron ore shares.

I am impressed by the company’s commitment to trying to lower its mining costs and automate various parts of the business, such as bringing in automated trucks.

The timing of my investments has been to jump on the business when sentiment about iron ore is weak. This has enabled me to invest in the miner when the Fortescue share price looks cheap. But, it was because of the two key factors below that I chose this one over all the other ASX 200 mining shares.

Big dividends

Fortescue is one of the biggest dividend payers on the ASX.

The last few years has seen Fortescue generate big net profits thanks to an elevated iron ore price.

I’m not expecting the next two years of dividends to be as good as the last two years. However, I’m happy with the level of dividend income that I’m expecting to receive because I bought at a noticeably lower Fortescue share price, so my yield on cost is good.

Using the dividend estimates from CommSec and the current Fortescue share price, the business is expected to pay an annual dividend per share of $1.36 in FY23 and 98 cents per share in FY24. This equates to a grossed-up dividend yield of 9.7% and 7% respectively.

I like that Fortescue can (but won’t always) pay larger dividends than other ASX mining shares. It helps that Fortescue usually has a low price-to-earnings (p/e) ratio.

Green hydrogen plans

As mentioned, I’ve used iron price weakness to buy Fortescue shares and I’m receiving a large dividend every six months whilst I’m a shareholder.

But, the reason for my long-term choice of this business over other ASX 200 mining shares is the green energy plan.

I think the world is going to need to make big changes to energy usage to get to net zero.

Fortescue is working around the world to make green hydrogen around the world. I think it could see more consistent demand than iron ore. It wants to make 15mt of green hydrogen annually by 2030.

While it’s possible cars powered by green hydrogen could become mainstream, I’m excited by the potential of green hydrogen being adopted by planes, boats and heavy machinery. These are segments that are, currently, harder to decarbonise.

Fortescue has already signed major supply deals with E.ON as well as with United Kingdom businesses Ryze Hydrogen and major construction vehicle business JCB.

As green hydrogen and green ammonia production is ramped up, I think that this will have a larger (and positive) influence on the Fortescue share price.

Snapshot of Fortescue shares

Over the last month, Fortescue shares have gone up by 22%.

The post Of all the ASX 200 miners, here’s why I decided to buy Fortescue shares appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in Fortescue Metals Group Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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