No wonder Fortescue Metals Group shares jumped more than 6% yesterday – against the trend of a falling market – after the company boosted dividend payout for 2018-19 to a record 90 cents a share.
The shares closed at $8.09, up 7.4%, but a long way short of the all-time high of $10.50 hit in January 2008.
The company will pay shareholders $1.85 billion midway through next month (60 cents a share), which will follow the 30 cents a share or $654 million interim and special dividend paid a month or so ago.
For major shareholder Andrew Forrest, he gets about $654 million on top of the $327 million of dividends he received from the company in March this year.
In fact, the company dominated by “Twiggy” Forrest has given the strongest indication yet by a senior Australian business leader about the result of Saturday’s Federal election and the news wasn’t good for Prime Minister Morrison, the Liberals and their coalition partners, the Nationals.
In a surprise statement on Tuesday, Fortescue announced a massive increase in its dividend from 19 cents to 60 cents a share, fully franked and brought forward to a payment date of June 14.
Total dividends for the 2018-19 financial year so far are 90 cents, including a 19 cent interim dividend and 11 cent special dividend declared in February, which was seen as a way of using up franking credits that would not be worth as much if the ALP won the poll and brought in its changes to dividend imputation.
The company paid total dividends for the year for 2017-18 of 23 cents a share, topped only by the 30 cent interim (including the 11 cents a share special payment to use up franking credits in reserve).
But the surge in global iron ore prices since the start of the year has obviously seen a surge in profit and franking credits for the company, so the pressure to use up the credit forced the company to make yesterday’s announcement of a record final and record full-year payout.
“This dividend reflects Fortescue’s unwavering determination to deliver shareholder returns through dividends and investment in growth,” chief executive Elizabeth Gains said in the statement.
“The strength of our operating cash flows enables further accelerated distribution of franking credits to eligible shareholders, inclusive of the 2018-19 interim and special dividends totalling A$0.30 per share”.
Helping drive the dividend has been a 47% surge in global iron ore prices (to $US71 a tonne for the the main ore type exported by Fortescue) (thanks in part to the January 25 dam walls tragedy in Brazil at an iron ore mine owned by Vale, one of Fortescue’s global rivals in the iron ore business.
Fortescue said it will maintain a dividend payout ratio of 50% to 80% of net profit after tax. And while the current dividend will be paid in June, in future payment dates will revert to March/April for interim dividends and September/October for final dividends (as before).
