The Fortescue Metals Group Limited (ASX: FMG) dividend has been a talking point over the years, rewarding shareholders with big payouts.
This comes as the mining giant has enjoyed bumper profits, particularly from the surging iron ore spot price.
Nonetheless, we take a look to see how the Fortescue dividend stacks up against its peers.
How does the Fortescue dividend compare to its sector?
As a broad comparison, the Fortescue dividend is on par with BHP Group Ltd (ASX: BHP), but less favourable than Rio Tinto Limited (ASX: RIO).
As an example, Goldman Sachs is predicting Fortescue to pay fully-franked dividends per share of US$1.16 in FY22 and US 74 cents in FY23.
Based on the current Fortescue share price of $21.73, this implies a dividend yield of 7% and 5%, respectively.
Next up, BHP is forecast to pay dividends of US$2.56 in FY22 and US$2.33 in FY23.
This reflects a dividend yield of 7.5% and 6.9% respectively.
While both miners are predicted to pay similar yields, it is Rio Tinto that offers the most bang for buck.
As such, Rio Tinto is assumed to pay big fully-franked dividends, outmatching the major miners.
Goldman Sachs has projected Rio Tinto to pay dividends of US$9.30 in FY22 and US$8.90 in FY23.
Again, based on the closing Rio Tinto share price, this equates to dividends yields of 11% and 10% respectively.
Are Fortescue shares a buy?
A recent broker note from RBC Capital Markets raised its rating on Fortescue shares by 6.7% to $16.00.
On the other hand, Citi had a different tone, slashing its outlook by 5.9% also to $16.00.
Based on both brokers, this implies a potential downside of around 26%.
Most notably, Goldman Sachs retained its sell rating on Fortescue shares last week. The broker indicated that the company’s share price is trading at a significant premium compared to its peers.
However, one near term tailwind is an improvement in Fortescue’s low-grade price realisations for iron ore.
In summary, Goldman Sachs put a 12-month price target on Fortescue shares at $15.20. This implies a downside of roughly 30% on the miner’s most recent share price.
Fortescue commands a market capitalisation of roughly $66.91 billion, making it the eighth largest company on the ASX.
The post How does the Fortescue dividend compare to its sector? appeared first on The Motley Fool Australia.
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More reading
- These 2 blue-chip ASX shares are opportunities: Expert
- Can the Rio Tinto share price break its all-time high in 2022?
- What’s boosting the BHP share price today?
- 2 ASX 200 dividend giants named as buys by brokers
- 2 ASX dividend shares expected to pay HUGE yields in 2022
Motley Fool contributor Aaron Teboneras 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 Bruce Jackson.
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