Among the key Australian stocks, Fortescue Metals Group Limited (AU:FMG) is known for its high dividend yield of 8.39%, significantly ahead of its sector average of 1.87%. Conversely, the share price performance paints a less appealing picture, with the stock declining by over 15% year-to-date. Analysts have a bearish outlook on FMG stock, with a majority of Sell ratings. They are concerned about the impact of the recent decline in iron ore prices on the miner’s financials.
Iron ore is witnessing a fall in its price due to lower demand from China, the top-most consumer of the commodity. The demand for iron ore, which is used in steelmaking, is hit by China’s property crisis.
Fortescue Metals is an Australian mining company specializing in iron ore production.
Let’s take a look at some of the numbers.
Fortescue Solid H1 FY24 Earnings
Fortescue delivered a strong performance in the first half of FY24. The miner reported a 41% surge in profit after tax to $3.33 billion, buoyed by elevated iron ore prices in the period. Additionally, underlying EBITDA climbed 36% year-over-year, while free cash flow soared by 68% to $2.66 billion. Revenue during this period also saw substantial growth, rising by 21% to $9.51 billion compared to the previous year.
The FY24 guidance indicates total iron ore shipments to be in the range of 192 and 197 million tonnes, compared to 192 million tonnes in 2023.
Fortescue Dividend Boost
Driven by solid numbers, Fortescue’s management rewarded shareholders with a fully franked interim dividend of AU$1.08 per share, marking a 44% increase compared to the same period last year. The interim dividend, which was paid on March 27, equates to a payout ratio of 65% of net profit after tax, consistent with the company’s policy of maintaining a payout ratio ranging between 50% and 80%.
Is Fortescue a Good Share to Buy?
According to TipRanks consensus, FMG stock has received a Moderate Sell rating based on eight Sell and two Hold recommendations. The Fortescue share price target of AU$20.76 is 16% lower than the current trading levels.
