Fortescue Share Price Drops 8% Today, What Happened? (ASX:FMG)

At time of writing, Fortescue Metals Group Ltd [ASX:FMG] shares are trading at $17.36, down 8% from yesterday.

Fortescue is an ASX-listed iron ore producer and exploration company in Western Australia.

What happened?

With no new announcements out and iron ore prices 1.7% higher overnight at US$124.37 a tonne, it’s likely the drop is coming from the company trading ex-dividends. That is, anyone buying the stock now will not be receiving the declared dividend.

Fortescue declared a dividend of $1 per share after also releasing their FY20 results last week.

The company had a great financial year, registering a record net profit after tax of US$4.7 billion and earnings per share of US$1.54, a 49% increase from last year. Revenue was US$12.8 billion, 29% higher than the year before.

For the 2020 financial year, Fortescue recorded a total of 178.2 wmt in shipments, a 6% increase from the previous year. Average realised price hit US$79 per dry metric tonne, a 16% more in the average Platts 62% CFR Index and a 21% increase from the average realised price last year.

Fortescue Chief Executive Officer, Elizabeth Gaines, said then:

Delivering enhanced returns to our shareholders remains a key priority and for FY20 we have declared US$3.7 billion in dividends, representing a payout ratio of 77 per cent of full year NPAT. We are proud to have achieved the number one ranking in the S&P/ASX100 Index for total shareholder returns over the three years to 30 June 2020 of 266 per cent.

What could happen next for the FMG share price?

Even with the drop today Fortescue shares are up 61% for the year.

Iron ore prices are up and demand for iron ore from China is also still strong, even with the pandemic.

There are a couple of concerns here.

One is how the trade tiff between Australia and China will affect iron ore. Australia is the largest iron ore exporting country in the world and it may be hard for China to find a replacement.

The other is how a global slowdown will affect iron ore demand from China, which would affect Fortescue’s future revenue and dividends.

Our editor Greg Canavan has identified ‘Five Dividend Stocks set to Thrive in the Post-Pandemic Era’ .

To read this free report you can click here.


Selva Freigedo

Selva Freigedo is a research analyst for The Rum Rebellion.

Born in Argentina, her passion for economic analysis started at a young age. Her father was an economist for the Argentinean governments and the family used to discuss politics and economics at the dinner table.

Argentina is a country with an unusual economic history. Growing up there gave Selva first-hand experience on different economic phenomena such as hyperinflation, devaluation and debt default.

Selva has also lived in Brazil, Spain and the USA.

Back in 2000 she was living in the US as the dot com bubble popped…
And in 2008 she was in Spain as the property market exploded and then collapsed…

She has seen first-hand what happens when bubbles burst.

Selva joined Fat Tail Investment Research’s team in 2016, as an analyst. She now writes from her vantage point in Australia, where she settled in 2015.

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