It's payday for Fortescue Ltd (ASX: FMG) shares investors, with the mining giant due to pay its interim dividend today.
The Fortescue share price is currently 0.43% lower at $16.14, while the S&P/ASX 200 Index (ASX: XJO) is down 0.5%.
Fortescue shares investors receive dividends today
Fortescue will pay a fully franked interim dividend for 1H FY25 of 50 AU cents per share today.
For investors participating in Fortescue's dividend reinvestment plan, you will receive your extra stock allocation today.
Your dividend funded the purchase of more Fortescue shares at a DRP price of $16.1763.
The DRP price was determined using the average of the daily volume-weighted average market price of all shares traded over five days from 3 March.
The FY25 interim dividend is less than half the interim dividend of FY24 when the miner paid $1.08 per share.
This follows a substantial fall in commodity prices, which led to lower revenue in 1H FY25.
Even though Fortescue increased its half-year production to a record level of 97.1 million tonnes of iron ore shipments, revenue was 20% lower than 1H FY24 at US$7.6 billion.
This contributed to a 53% fall in the net profit after tax (NPAT), which is the metric Fortescue uses to guide its decisions on dividends.
Fortescue has a dividend policy of paying out 50% to 80% of its full-year NPAT in dividends.
The interim dividend represents a 65% payout.
What's next?
The mining giant has provided full-year FY25 production guidance of 190Mt to 200Mt of iron ore shipments.
Fortescue forecasts capital expenditure in its metals business of between US$3.5 billion and US$3.8 billion.
Fortescue forecasts capital expenditure in its energy business of approximately US$400 million.
Should you buy Fortescue shares?
In a recent note, UBS upgraded its rating on Fortescue shares to neutral, citing that the "risk-reward is now more balanced."
The broker has a 12-month share price target of $16.70 on Fortescue shares.
The broker said:
FMG is leveraged to the iron ore price, resulting from its single commodity exposure across its operating portfolio.
While Energy will eventually drive modest diversification as the business decarbonises towards Real Zero 2030 targets, it is the iron ore price and low grade discounts/high grade premiums that drive the investment case.
We run scenarios around our base case to highlight the risk-reward. In our upside scenario, we hold low grade discounts around current spot levels of ~14%, and run iron ore prices 10% above our base case across the forward estimates.
This derives an upside fair value of A$22.5/sh. In our downside scenario, we widen low grade discounts to 18% and reduce our iron ore price profile by 10% across the forwards, with a resulting fair value of A$11.0/sh.
