The S&P/ASX 200 Index (ASX: XJO) share Fortescue Metals Group Ltd (ASX: FMG) is one of the larger positions in my portfolio and I'm planning to hold it forever.
There are a few other ASX 200 shares that I own in my portfolio, such as Brickworks Limited (ASX: BKW) and Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), which I also plan to own for the long term.
But, Fortescue could be the most interesting ASX 200 share that I'm planning to own for a long time.
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Attractive mining business
I think that Fortescue has proven over the past two decades to be one of the most effective ASX mining shares, perhaps one of the best in the world. It takes a lot of skill to create a large mining company from nothing.
Fortescue has made billions of dollars of net profit after tax (NPAT) through mining iron ore. No one can say what the iron ore price will be in three, five, ten or twenty years from now. But, it has been an important commodity for a very long time and remains an integral commodity used in steel.
The mining business could continue to generate lots of iron ore profit for many years to come, particularly with its new higher-grade Iron Bridge project, as well as the potential African expansion.
I like the potential for the ASX 200 share to expand into mining other commodities such as lithium, and possibly copper through its exploration activities.
While I'm not baking this into my thoughts on the business, its decarbonisation efforts could mean that it can produce 'green' iron ore, which could command a higher price than normal iron iore.
Good dividends?
Dividends are paid by the ASX 200 share from net profit generation. Net profit and dividends are not guaranteed at all, so I'm not basing my reason to hold the business forever on dividends.
But, with how low the Fortescue price/earnings (P/E) ratio is normally trading at, this helps provide Fortescue with a very pleasing dividend yield.
The ASX mining share has demonstrated a commitment to paying good dividends, and I think this will continue for the foreseeable future, even if profit isn't as good as in the last few years.
At the current Fortescue share price, it could pay a grossed-up dividend yield of 9.4% in FY24 and 7.3% in FY25, according to Commsec estimates. But, it could be stronger if the iron ore price goes higher than expected.
Fortescue Future Industries (FFI)
The ASX 200 share is rapidly expanding its non-mining operations with FFI.
It acquired Williams Advanced Engineering (WAE), a high-performance battery business. Fortescue hopes for this business to become a strong player in the global market in the coming years.
The key push is for FFI to produce a large volume of green hydrogen and green ammonia.
Hydrogen can be used as a fuel source. It can be produced emission-free by utilising renewable energy power for electrolysis, splitting water into hydrogen and oxygen.
If it goes well, this could be the start of a large new global industry and Fortescue may be one of the biggest players. Scale could be key to achieving strong margins in this new sector.
Time will tell how profitable FFI can become, but it's currently very promising that it has signed up customers already such as E.ON, JCB and Ryze Hydrogen to purchase a sizeable amount of the planned green hydrogen production.
The government also recently announced a $2 billion fund to help get some of the biggest green hydrogen projects off the ground. Fortescue could be one of the beneficiaries of this fund.
The ASX 200 share's production of green hydrogen and ammonia for heavy machinery, boats and planes could unlock decades of future earnings, which is why I'm confident about owning the company for the long term.
