Shareholders in Fortescue Metals Group (including the biggest, Chairman Andrew Twiggy Forrest) can look forward to a sharp increase in dividend when the company reports its 2016-17 profit a week next Monday.
After Rio Tinto raised its interim dividends ad added $US1 billion to the existing $US500 million buyback, Fortescue is expected to follow suit after a strong hint yesterday from CEO, Nev Power.
He said yesterday that with the company enjoying strong margins on the back of improved iron ore prices, it needs to balance returns for debt holders and shareholders.
"We flagged at the time of the interim dividend that we would be reviewing the payout ratio at the time of final dividend. The board will consider this in two weeks," he said at the Diggers and Dealers conference in Kalgoorlie, Western Australia.
Fortescue currently has a payout ratio of 30% to 40% of net profit, and declared a sharply higher interim dividend of 20 cents a share in February, representing 38% of profit.
It paid a total for 2015-16 of 15 cents a share with a final of 12 cents – analysts expect a multiple of that figure to be the final for the year to June 30.
Earlier this month, Rio Tinto paid a record interim of $US1.10 a share (up from 45 cents a year earlier). BHP releases its 2016-17 profit and dividend details on August 22.
BHP is expected to push its final higher from its interim of 40 US cents a share (it paid a final last year of 14 US cents share).
The surge in dividends for these big miners is being driven by the jump in iron ore prices from the lows at the start of 2016.
Iron ore currently trades around $US76 per tonne after trading around $US60 to $US66 a tonne in the closing months of the financial year.
“The Chinese steel industry has maintained production consistently around 800 million tonnes and we believe it will do that for decades to come,” Mr Power said yesterday in a story from AAP.
Reports yesterday said the Chinese government has ordered steel making and other polluting heavy industry to curtail production in the coming winter, led by Hebei province.
Fortescue said last month it expects to trim costs further this financial year and is targeting steady iron ore shipments in 2017-18. Fortescue shares dropped 10 cents, or 1.7%, to $5.77 on Tuesday.
