Bell Potter forecasts FMG final dividend $2.57Vesna PoljakThe...

Bell Potter forecasts FMG final dividend $2.57

Vesna Poljak

The historic iron ore price rally puts Fortescue Metals Group in pole position to pay a final dividend of $2.57 a share, according to broker Bell Potter, taking its full-year payout to $4.04 a share.

Bell Potter analyst David Coates upgraded his final dividend estimate from $2.41 a share, and concludes the stock is trading on a yield of 10.4 per cent. The broker's new target price is $23.96 from $23.85 and its recommendation lowered to "hold" from "buy" as the upside for the stock from higher prices appears largely capped.

Assuming an interim dividend of $1.78 in 2021-22, the forward looking dividend yield is 17.5 per cent fully franked and $4.35 a share (final plus interim).

In a scenario where the spot price held to the end of the June quarter -- for an average of $US200 -- Bell Potter finds the final dividend could be as high as $2.62 a share, but that's only 5¢ higher than its base case.

Unfavourable exchange rate moves and higher costs are the two main offsets to higher earnings, Mr Coates finds.