The Fortescue share price is handily beating the ASX 200 today

The Fortescue Metals Group Limited (ASX: FMG) share price is currently up by more than 4% at the time of writing. That compares to the S&P/ASX 200 Index (ASX: XJO) which is only up by 0.25%, which includes the impact of ASX resource shares rising.

Fortescue isn’t the only one that’s doing well. For example, the BHP Group Ltd (ASX: BHP) share price is up 2% and the Rio Tinto Limited (ASX: RIO) share price is up by 2.75%.

ASX coal shares are also doing well today, with the Whitehaven Coal Ltd (ASX: WHC) share price up by more than 4% and the New Hope Corporation Limited (ASX: NHC) share price up by 5%.

What’s going on with the Fortescue share price?

One of the main things that normally influence sentiment about Fortescue is a change in the iron ore price. A higher iron ore price can largely translate into higher profit for Fortescue because the costs to extract 1mt of iron ore don’t change as the iron ore price rises (aside from paying more to the government).

According to Commsec, the iron ore price only rose by 0.1% overnight.

But, aside from a bit of market positivity returning about miners today, there could be some positive thoughts surrounding the Fortescue dividend after some comments from Fortescue leader Andrew Forrest.

Dividends to keep flowing?

According to reporting by the Australian Financial Review, he has rubbished the idea that spending money on decarbonising Fortescue will mean lower dividend payments.

He said that Fortescue has enough cash right now to fully pay for the decarbonisation plan.

The AFR quoted him from London:

We could write out a cheque for this. We’ve got over $US6 billion in cash right now. So, why would we get rid of the dividend policy? This has no cash challenge implications at all.

One point that Forrest referred to was that the Iron Bridge project construction is finishing. In FY23, Fortescue is expecting 1mt of production from Iron Bridge. This project’s funding has been funded out of cash flow, which hasn’t hurt the dividend policy (of paying up to 80% of net profit out as a dividend).

Forrest said:

That’s nearly $4 billion. That comes to an end, that starts production. They just haven’t thought this through.

Investments to help with costs

Fortescue isn’t investing in renewables just for the sake of going green, it will also help lower costs because the green energy generated will save money straight away, leading to a “double-digit rate of return”, according to reporting by the AFR. This could help the Fortescue share price, as lower costs help profit.

Forrest said:

This is not like those huge construction programs you’ve always seen me do: scoping, feasibility study, definitive feasibility study, front-end engineering design, construction; then commissioning, might work, might not, all the repairs when it doesn’t, then ramp up. Then you might get a cheque.

That’s not how renewable works. You roll it out like a carpet. And every time you do that, you plug it in. It’s simple, it’s proven, and you start saving money immediately.

The Fortescue boss explained that renewable energy will come with lower costs of maintenance, operations and fuel inputs, compared to fossil fuel power stations.

As Forrest points out “the wind doesn’t send you a bill. The sun doesn’t send you a bill. Pump hydro doesn’t send you a bill. It’s free.”

Fortescue share price snapshot

Despite today’s rise, the Fortescue share price is still down more than 10% over the past month.

The post The Fortescue share price is handily beating the ASX 200 today appeared first on The Motley Fool Australia.

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More reading

• Fortescue shares: Buy, hold, or fold?
• Broker gives its verdict on the Fortescue share price
• The Fortescue share price has outpaced the ASX 200 today. Could green dreams be why?
• Is the Fortescue dividend at risk from the miner’s $9b decarbonisation strategy?
• Why has the Fortescue share price been having such a rough trot lately?

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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