How does the Fortescue dividend stack up against BHP and Rio?

Is Fortescue still a dividend winner in 2023?

| More on:
Australian dollar notes inside the pocket on jeans, symbolising dividends.

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

Key points

  • Fortescue shares made a name for themselves in recent years by paying out massive and unprecedented dividends
  • But Fortescue's dividends peaked in 2021, and have been on the slide ever since
  • Today, the ASX 200 mining giant still offers a respectable dividend yield of over 9%

Over the past few years, Fortescue Metals Group Limited (ASX: FMG) shares have built up a reputation as one of the heavy hitters on the ASX when it comes to dividends. Fuelled by record iron ore prices, Fortescue was able to raise its annual dividend from $1.14 per share in 2019 to a record $3.58 per share in 2021.

If Fortescue kept up that level of dividend generosity, this ASX 200 miner would have a trailing dividend yield of 17.76% right now.

Alas, 2022 and 2023 so far have not been quite as kind to Fortescue investors as 2021 was.

So today, let's check out how the Fortescue dividend compares to the company's mining rivals in BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO).

As we've previously flagged, the Fortescue dividend has come back to earth since the highs of 2021. In 2022, the company paid out a total of $2.07 in dividends per share. And in 2023 so far, Fortescue's March interim dividend came to 75 cents per share, down from last year's interim dividend of 86 cents.

That 75 cents per share dividend, combined with last year's final dividend of $1.21 per share, gives the Fortescue share price a trailing dividend yield of 9.72% on current pricing. That comes fully franked too, as is typical with Fortescue's payouts.

How does the Fortescue dividend stack up against BHP and Rio?

Let's compare all of that to 'the Big Australian', BHP. BHP's dividend trajectory over the past few years has been similar to that of Fortescue. In 2019, BHP shares paid out $3.33 worth of dividends per share. This rose to $4.03 per share in 2021 and then to a record $4.63 in 2022.

However, BHP's interim dividend for 2023 was a major downstep from the previous year, with the miner only forking out $1.36 per share, as opposed to the $2.08 investors bagged in March 2022.

Today, BHP shares have a trailing dividend yield of 8.95%, fully franked.

Like Fortescue, Rio Tinto's dividends also peaked in 2021. We saw a similar path trodden by this ASX 200 miner, with dividends ramping up from $8.97 per share in 2019 to a record $12.77 per share by 2021 (that includes Rio's special dividends).

But 2022 saw this decline somewhat, with the miner doling out a total of $10.47 in payouts last year. 2023's final dividend also saw a drop, falling from $5.77 ($6.63 including the special dividend) in 2022 to the $3.26 we saw last month.

Today, Rio shares offer a trailing and fully-franked yield of 6.55%.

Foolish takeaway

So Fortescue is clearly the winner today when it comes to raw dividend yield. However, remember that a company's dividend yield always reflects what it has paid out in the past, not what it will pay out in the future. It's entirely possible that 2023's remaining dividends push BHP over the top of Fortescue in terms of dividend yield.

Fortescue is also far more reliant on iron ore for its earnings, whereas BHP (and Rio to a lesser extent) have a more diversified earnings base of other metals.

But there's no doubt that Fortescue, as well as BHP and Rio, have been absolute cash machines for ASX dividend chasers in recent years. It will be interesting to see what the rest of 2023 and 2024 hold in store for income investors.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. 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.

More on Dividend Investing

A senior investor wearing glasses sits at his desk and works on his ASX shares portfolio on his laptop2
Dividend Investing

Why I think these 2 ASX dividend shares offer great buying right now

These two stocks could be two of the best dividend stocks to buy today…

Read more »

Contented looking man leans back in his chair at his desk and smiles.
Dividend Investing

Buy BHP and this ASX dividend stock in July

Let's see why analysts are bullish on these income options.

Read more »

Happy young couple saving money in piggy bank.
Dividend Investing

I'd buy 5,264 shares of this ASX 200 stock to aim for $250 a month of passive income

This business is a great candidate for large and growing income.

Read more »

woman talking on the phone and giving financial advice whilst analysing the stock market on the computer with a pen
Dividend Investing

2 ASX shares that I think are top buys for both growth and dividends

These stocks could provide everything I’m looking for.

Read more »

Male hands holding Australian dollar banknotes, symbolising dividends.
Dividend Investing

Buy Telstra and this ASX dividend stock for 4% to 7% yields

The telco giant and this stock are expected to offer big yields.

Read more »

guy helping girl invest in shares and dividends
Dividend Investing

2 ASX dividend shares to buy this month: experts

Here’s why these high-yield dividend stocks are appealing…

Read more »

A man in a suit looks serious while discussing business dealings with a couple as they sit around a computer at a desk in a bank home lending scenario.
Dividend Investing

Beat low interest rates with these top ASX dividend shares

Analysts think these shares could be top picks for income investors.

Read more »

Two funeral workers with a laptop surrounded by cofins.
Dividend Investing

1 ASX dividend stock down 25% I'd buy right now

I think this is a great buy for a few different reasons.

Read more »