Why has the FMG share price tumbled today?

Posted: 6 September 2021 11:54 am
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Shares in iron ore miner FMG are still up 19% over the last 12 months.

Shares in the iron ore miner Fortescue Metals Group (ASX: FMG) are among the biggest losers on the ASX boards on Monday. The stock slid as much as 11% in early trade and was still down nearly 9% at $18.99 at the time of writing. So is there a reason to panic?

What has caused the slide in the FMG stock price?

Australia’s third largest iron ore miner is certainly on a downslide, but the reason behind this is actually good news for investors.

The Fortescue stock has gone ex-dividend on Monday, meaning today is the record date for paying the final dividend that the company declared at its results last month. Typically, the share price drops by the amount of the dividend paid to reflect the fact that new shareholders are not entitled to that payment.

FMG last week declared its highest ever annual profit at US$10.3 billion, a 117% jump on the previous year. That allowed the company to shower rewards for its shareholders, delivering a fully-franked final dividend of $2.11 a share.

"This is double last year's payment, is its largest payment ever and about 10% of its share price. The eighth largest company on the ASX could weigh on our market on Monday," CommSec analysts said in a note.

Eligible shareholders can now look forward to receiving this dividend in their bank accounts over the next few weeks.

Outlook subdued

The massive payout is reflective of Fortescue’s record shipments, industry leading low costs through its disciplined cost management, but most of all the sky high iron ore prices during the first half of 2021.

Like its peers, Fortescue Metals has benefited from a spike in iron ore prices between April and July this year, when the steel-making ingredient largely stayed above US$200 a tonne. But this is changing as demand moderates in China, the world’s biggest market for iron ore.

Iron ore prices have tumbled more than 40% in the last few weeks, and overnight, spot prices of the key steel-making ingredient were slightly higher at US$149 a tonne.

Analysts believe prices could fall further, to around US$120 a tonne, over the coming months. This will no doubt reflect in FMG’s profits over the next reporting period and may also prompt some investors to book profits from the recent run up in the stock.

Considering buying FMG shares?

If you are keen to buy shares in Fortescue Metals, you can invest through an online share trading platform.

Keep in mind that not all platforms offer the same list of stocks. Some offer US stocks only, so make sure to select a platform that offers ASX-listed stocks.

Choose from the dozens available for Australian investors. Compare the features and fees from the plethora of trading platforms available.

Looking for a low-cost online broker to invest in the stock market? Compare share trading platforms to start investing in stocks and ETFs.

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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