Here's why the Fortescue (ASX:FMG) share price sank 17% in March

The Fortescue Metals Group Limited (ASX:FMG) share price was out of form and sank notably lower in March. Here's what you need to know…

| More on:
Red wall with large white exclamation mark leaning against it

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Fortescue Metals Group Limited (ASX: FMG) share price was uncharacteristically out of form in March.

During the month, the iron ore producer's shares fell a disappointing 17%.

This compares to a gain of 1.8% by the the S&P/ASX 200 Index (ASX: XJO).

Why did the Fortescue share price underperform in March?

There were a couple of reasons for the underperformance of the Fortescue share price last month.

The first was the company's shares trading ex-dividend on the very first day of the month for its huge interim dividend.

When a company's shares go ex-dividend, they tend to drop by the amount of the upcoming dividend. This is to reflect the fact that the rights to the dividend remain with the seller and aren't transferred to the buyer.

In the case of Fortescue, it was paying shareholders a massive $1.47 per share dividend. This is the equivalent of a 6.1% yield, which accounts for over a third of the Fortescue share price decline.

What else was weighing on the company's shares?

However, having the biggest impact on the Fortescue share price last month was the iron ore price.

The price of the base metal came under pressure in March after Chinese authorities decided to restrict the output for some steel mills in Tangshan until the end of 2021. Regulators made the move in an attempt to combat rising pollution levels.

This led to analysts at Goldman Sachs predicting that the steel making ingredient would end up in a surplus in 2022 instead of a deficit.

According to Metal Bulletin, this news led to the benchmark 62% fines iron ore price losing ~US$10 a tonne or over 6% during the month to end it at US$165.15 a tonne.

In light of this, it will come as no surprise to learn that mining giants BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO) also underperformed the market materially last month as well.

Should you invest $1,000 in Fortescue Metals Group right now?

Before you buy Fortescue Metals Group shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Fortescue Metals Group wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 7 February 2025

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. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Fallers

a man holds his arms out and shrugs his shoulders as if indicating he doesn't know the answer to a question he's been asked.
Share Fallers

Why Guzman Y Gomez, Jumbo, PWR, and REA Group shares are crashing today

These shares are ending the week deep in the red. What's going on?

Read more »

Three guys in shirts and ties give the thumbs down.
Share Fallers

Why ANZ, Goodman, Magellan, and Super Retail shares are sinking today

These shares are having a very tough time on Thursday. But why?

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why Cleanaway, NAB, Step One, and Stockland shares are falling today

These shares are having a tough time on hump day. What's going on?

Read more »

Three guys in shirts and ties give the thumbs down.
Share Fallers

Why Challenger, Reliance, Resimac, and SRG shares are sinking today

These shares are having a disappointing session on Tuesday. But why?

Read more »

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Share Fallers

Why AMP, Civmec, Cochlear, and LGI shares are falling today

These shares are ending the week in the red. But why?

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why Graincorp, IAG, Pro Medicus, and Treasury Wine shares are falling today

These shares are having a tough time on Thursday. Let's find out why.

Read more »

A gambler at a casino bets a pile of chips on one number
Share Fallers

Down 78% in a year, time to throw in the towel on Star Casino shares?

Has the time come to cut and run?

Read more »

Three guys in shirts and ties give the thumbs down.
Share Fallers

Why Amotiv, Dexus Industria, St Barbara, and Wildcat shares are sinking today

These shares are having a tough time on hump day. But why?

Read more »