- Investors are always in the look for stocks that offer high dividend yields to boost their income.
- Thus, dividend stocks currently offer the best options to boost income, especially when the economy is recovering from the negative impact of COVID-19, and official interest rate is at a historic low of 0.10%.
- Fortescue Metals Group, a well-known global iron ore miner, leads in dividend yields in the year so far.
Investors are always in the look for stocks that offer high dividend yields. These stocks own more significance when the economy is recovering from the negative impact of COVID-19, and official interest rate is at a historic low of 0.10%. Moreover, even the term deposits are not paying much over 1%. Thus, dividend stocks currently offer the best options to boost income.
The parameters of dividend yields is used to evaluate the stocks that suit their requirements. A dividend yield is a financial ratio which is used to determine how much dividend is paid by a company relative to its stock price.
Fortescue Metals Group Ltd (ASX:FMG) is a well-known global iron ore miner and is engaged in the exploration, development, production, processing, and sale of iron ore. The iron ore miner operates four mine sites in the Pilbara region. It also operates designed rail and port facilities for supply to Port Hedland.
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Fortescue has an annual dividend yield of nearly 10.8%, 100% franked. The total yield stands at 11.01% as of 25 June 2021. It paid a cash dividend amount of AU$1.47 on 25 March 2021. The ASX-listed firm has a market cap of AU$70.01 billion.
Robust half-year results
Fortescue released its half-yearly financial results earlier in February this year. The company reported strong earnings due to rise in iron prices and demand in the last one year. In the report, the company said that its shipments, earnings, and operating cashflow all exceeded any half-year result in its history.
The iron ore prices rose 42% Y-o-Y to nearly AU$146.86 per dry metric tonne at the end of December.
The company’s underlying earnings before interest, taxes, depreciation, and amortisation (EBITDA) stood at AU$8.51 billion, a 57% rise from the corresponding period of last year.
Andrew 'Twiggy' Forrest's business recorded a net profit after tax (NPAT) of nearly A$5.28 billion, a rise of 66% Y-o-Y. The revenue was nearly AU$11.97 billion, while cashflow from operating activities was AU$5.5 billion.
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Fortescue’s CEO Elizabeth Gaines said that the company reported its best half-year operating and financial results since the company was established. The shareholders of Twiggy's mining business would also have a share in the half-year success, she also said.
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The dividend represents a 93% increase on the FY20 interim dividend and an 80% payout of the company's first-half NPAT for FY21.
What has driven Fortescue’s share price?
The Fortescue share price is up 57% over the past 12 months. The main reason behind the robust gains in the share price in the last 12 months has been a brisk increase in iron ore prices. The same has resulted in the iron ore miner posting a healthy increase in its margins and cash flows. Thus, the company was able to return the highest single dividend in company’s history.
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However, investors should know higher dividend yields do not always indicate attractive investment opportunities. For instance, the dividend yield of a stock could be on the higher side due to a fall in its stock price. Thus, investors should carefully decide on dividend stocks. They should also keep in mind the fundamentals and other key financial parameters while going ahead with a buy.