My Fortescue shares are up 30% in 3 months. Should I buy more?

The Fortescue Metals Group Limited (ASX: FMG) share price has performed very well over the last three months, rising by around 30%.

After such a strong run for the ASX iron ore share, should it be considered a leading investment contender or would it be better to be left alone?

Fortescue isn’t the only one to be doing well in the iron ore sector. The share prices of BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO) have also risen.

When times are good, it can mean big dividends paid by Fortescue shares. Let’s have a look at how much dividend income the resources giant may pay.

Dividend expectations

In FY23, Fortescue is expected to pay an annual dividend per share of $1.416, according to Commsec. This could translate into a forward grossed-up dividend yield of 9.1%. The Fortescue share price has done so well that the prospective dividend yield has been pushed down.

Another sizeable annual payment is expected in FY24 from the ASX mining share, of $1.12 per share. If this is paid it would amount to a grossed-up dividend yield of 7.2%

What’s driving the Fortescue share price higher?

The business appears to be benefiting from the steadily improving iron price. According to Commsec, it has risen to US$120 per tonne.

As a commodity business, changes in the resource price can have an outsized effect on its profit-generating ability and investor sentiment.

With Chinese lockdowns seemingly over, economic activity is rebounding in the country. This could mean more economic activity, driving higher demand for steel and iron. If the construction sector can achieve a turnaround, that might be even more helpful.

It’s hard to judge how much further the supply and demand relationship can drive the iron ore price from here.

Is it a good time to buy Fortescue shares?

Fortescue seems to be one of the more volatile blue chips on the ASX. But, I’ll make no predictions about the next time it’s going to fall significantly.

When it comes to commodity businesses, I think it would be wise to avoid thinking the good times are going to last forever.

I believe that there will be another good time to invest in Fortescue shares. I’m glad my current holding has done well, but this could be close to the peak price (in the short term).

For me, I’d rather wait until the Fortescue share price is back to $17.50 or under.

The post My Fortescue shares are up 30% in 3 months. Should I buy more? appeared first on The Motley Fool Australia.

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More reading

• Fortescue shares: 4 reasons to buy (and not buy) in 2023
• My ASX shares fell 15% last year. Here’s what I’m doing now
• ASX 200 mining shares: To buy or not to buy?
• Why did iron ore shares lag the ASX 200 on Monday?
• Why is the Fortescue share price being hammered on Monday?

Motley Fool contributor Tristan Harrison has positions in Fortescue Metals Group. 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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