Ann: Dividend/Distribution - FMG, page-53

Macquarie retains outperform recommendation on Fortescue

William McInnes

Macquarie has maintained its outperform recommendation on Fortescue Metals Group after the miner delivered an "impressive" dividend and result.

The broker increased its price target from $18.00 to $19.00, saying its upgrade momentum was strong.

Macquarie remains upbeat on Fortescue Metals Group. Fairfax Media

"Fortescue’s FY20 result was a record for the company with earnings and cash flow in line with our expectations," said analyst Hayden Bairstow.

"The final dividend payout was marginally below our expectations but delivers an impressive ~10 per cent fully franked yield for FY20."

Macquarie said its shipping data suggested Fortescue had already made a strong start to the 2021 financial year, suggesting it would deliver a result towards the top end of guidance.

"Fortescue’s earnings upgrade momentum remains significant," said Mr Bairstow.

"A spot price scenario generates 92 per cent and 234 per cent higher earnings than our forecasts for FY21 and FY22 and translates to free cash flow yields of 17 to 18 per cent. Post the spend on Eliwana and Iron Bridge, Fortescue’s cash flow yields rise to over 20 per cent."

On Tuesday, Fortescue was trading 0.2 per cent higher at $18.59.