Fortescue Metals Group Ltd (ASX: FMG) shares are a popular option for income investors.
This is because the mining giant returns a good portion of its earnings to shareholders in the form of dividends each year.
The good news is that another big dividend yield is expected from the miner this year based on its current share price.
So, what would it take to get $10,000 of passive income from Fortescue shares?
Passive income from Fortescue shares
According to a recent note out of Goldman Sachs, its analysts are forecasting a US$1.18 (A$1.76) per share fully franked dividend in FY 2023.
Based on the current Fortescue share price of $21.42, this will mean a yield of 8.2%. This is more than double the Australian share marketâs typical average dividend yield.
With that in mind, in order to generate $10,000 of passive income, you would need to buy approximately 5,682 Fortescue shares. This equates to a sizeable investment of almost $122,000.
A word of warning
It is worth noting that this level of income may not last. This is due to Fortescueâs huge decarbonisation spend, which is expected to consume a significant portion of its free cash flow and weigh on its dividends.
For example, Goldman is forecasting dividends of only 62 US cents (A$0.92) per share in FY 2024 and then 40 US cents (A$0.595) per share in FY 2025.
This means that for those two financial years investors would receive paychecks of approximately $5,230 and $3,380, respectively.
Itâs partly for this reason that Goldman has a sell rating and $15.50 price target on Fortescue shares. Which, incidentally, suggests that your $122,000 original investment could reduce to just over $88,000.
Lower income and capital losses are not a great mix even if the current yield is attractive.
The post How to generate $10,000 of passive income from Fortescue shares appeared first on The Motley Fool Australia.
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More reading
- Is it time to buy ASX 200 iron ore shares right now?
- Fortescue share price marching higher as green hydrogen plans heat up
- Are Fortescue shares back on the menu amid job cuts?
- Could buying Fortescue shares at under $22 make me rich?
- How can I hope to retire rich when the share market is falling?
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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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