This ASX share in my portfolio has the biggest dividend yield

This stock has been a cash cow for my portfolio.

| More on:
A retiree relaxing in the pool and giving a thumbs up.

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

Many ASX shares in my portfolio are dividend shares that I believe have solid yields. But, there's one stock with the largest dividend yield. It has been paying big dividends for years, and FY24 could see another major payout.

That company is ASX mining share and iron ore giant Fortescue Ltd (ASX: FMG).

A great thing about iron ore shares is they typically trade on a low price/earnings (P/E) ratio which effectively produces a relatively high dividend yield.

How big is the ASX dividend share's yield?

In the 2023 financial year, Fortescue paid an annual dividend per share of A$1.75, which represented a cut of 15%.

At the current Fortescue share price, the FY23 payout represents a grossed-up dividend yield of around 10%.

It's unlikely that the FY24 dividend per share will be the same as last financial year.

At the moment, the projection on Commsec is that owners of Fortescue shares may receive a dividend per share of $1.39, which would be a grossed-up dividend yield of 7.9%

However, the broker UBS has estimated Fortescue could pay an annual dividend per share of $1.45, which would be a grossed-up dividend yield of 8.2%.

Fortescue's dividend payout ratio policy is to pay out between 50% to 80% of full-year underlying net profit after tax (NPAT).

Could the Fortescue shareholder return be stronger?

The iron ore price has been strengthening, which is great news for Fortescue's monthly profitability.

Over the last few months, the iron price has risen to above US$130 per tonne. It's now able to make much more profit than seven months ago when the iron ore price was below US$110 per tonne.

If the iron ore price were to keep rising and reach US$140 (or even higher), it'd be even better news for the ASX share.

China is doing what it can to stimulate the economy with different announcements. Infrastructure and manufacturing demand may offset the weakness of the residential construction sector.

However, the business is also investing large amounts of cash into its green energy division, so stronger profits could help fund an acceleration in investments in the green hydrogen and battery segments.

Valuation

Using the projection for FY24 on Commsec, the Fortescue share price is valued at under 10x FY24's estimated earnings.

However, I'd wait for the Fortescue share price to fall back before considering an investment after its strong run. I believe an iron ore price under US$100 per tonne would be a better time to look at an ASX iron ore share like this one.

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 30 April 2025

Motley Fool contributor Tristan Harrison has positions in Fortescue. 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 Opinions

A man and woman sit next to each other looking at each other and feeling excited and surprised after reading good news about their shares on a laptop.
Opinions

Where I'd invest in ASX shares after the RBA interest rate cut

These stocks look really attractive to me. Here’s why…

Read more »

Miner looking at a tablet.
Opinions

3 reasons why the Fortescue share price could still be a buy

Let’s dig into why this mining giant could be a solid buy.

Read more »

A young woman wearing a red and white striped t-shirt puts her hand to her chin and looks sideways as she wonders whether to buy NAB shares
Opinions

The pros and cons of buying Wesfarmers shares in May

Is this retail giant an appealing opportunity?

Read more »

Smiling man sits in front of a graph on computer while using his mobile phone.
Opinions

2 ASX 200 shares that I think are still bargains after the market rally

These businesses look like attractive opportunities. Here’s why…

Read more »

A young woman looks at something on her laptop, wondering what will come next.
Opinions

Worried about another stock market sell-off?

Market declines don’t need to be too scary.

Read more »

An evening shot of a busy Times Square in New York.
Opinions

The pros and cons of buying US-focused ASX ETFs in the current environment

In a short amount of time, the US share market has erased the declines that it went through at the…

Read more »

I young woman takes a bite out of a burrito n the street outside a Mexican fast-food establishment.
Opinions

Time to cash in your gains? Brokers say sell on these 3 ASX 200 shares

Experts say these stocks are overvalued and it may be time to take some profits off the table.

Read more »

A woman sits at her computer with her chin resting on her hand as she contemplates her next potential investment.
Opinions

Here's what I'd do after the big ASX stock market rally

The US and China are working towards a trade deal.

Read more »