Fortescue share price races higher on dividend news

The Fortescue Metals Group Limited (ASX:FMG) share price has raced higher after the iron ore producer announced a very generous dividend…

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One of the best performers on the S&P/ASX 200 index on Tuesday has been the Fortescue Metals Group Limited (ASX: FMG) share price.

In afternoon trade the iron ore producer's shares raced as much as 6% higher to $8.00 following an update on its dividend.

What did Fortescue announce?

This afternoon Fortescue announced that its board have declared a fully franked dividend of 60 cents per share.

This latest dividend brings Fortescue's FY 2019 to-date dividends to a total of 90 cents following the declaration in February of a 19 cents per share interim dividend and an 11 cents per share special dividend.

Fortescue's chief executive officer, Elizabeth Gaines, revealed that its strong operational performance and higher iron ore prices have allowed the board to increase its return to shareholders.

She said: "This dividend reflects Fortescue's unwavering determination to deliver shareholder returns through dividends and investment in growth. The strength of our operating cashflows enables further accelerated distribution of franking credits to eligible shareholders, inclusive of the FY19 interim and special dividends totalling A$0.30 per share."

Before adding: "The ability to deliver this increased return to our shareholders reflects the success of our integrated operations and marketing strategy, enhanced product mix as well as the strength of demand for iron ore."

According to the release, Fortescue's realised iron ore price increased 47% in the March quarter to an average of US$71 per dry metric tonne.

This increase was driven by a number of factors. These include its successful integrated operations and marketing strategy increasing the volume of higher margin product shipped, continued strength in Chinese steel production, increasing demand for Fortescue's products following moderation of steel mill margins in China, and sustained strength in the benchmark iron ore price following supply disruptions in Brazil and Australia.

The latter has led to significant drawdowns in iron ore inventories at Chinese ports and helped drive the shares of rivals BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO) higher as well.

When will the dividend be paid?

Fortescue's shares will trade ex-dividend for this payout on Wednesday May 22. After which, it will be paid to eligible shareholders a few weeks later on June 14.

Based on its current share price, this dividend alone provides a very generous fully franked 7.5% dividend yield.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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