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Why The Fortescue (ASX:FMG) Share Price Rose 7.5% Today

The Fortescue Metals Group Limited (ASX: FMG) share price went up almost 7.5% today.

Fortescue Metals Group or FMG is a global leader in the iron ore industry, known for its leading development of world class infrastructure and mining assets in the Pilbara region of Western Australia. Fortescue was founded in 2003 by Andrew Forrest, who is now one of Australia’s wealthiest people. The vast majority of Fortescue’s iron ore, a steel-making ingredient, is shipped and sold to Chinese customers.

Fortescue’s Bigger Dividend

The Fortescue Board has today declared a fully franked dividend of $0.60 per share, which means that the total dividends for FY19 to date is $0.90 per share inclusive of the $0.19 per share interim dividend and $0.11 per share special dividends declared in February.

In 2018 the dividend only amounted to $0.23 per share, so $0.90 per share is 291% higher than the year before.

The Fortescue CEO Elizabeth Gaines said: “This dividend reflects Fortescue’s unwavering determination to deliver shareholder returns through dividends and investment in growth.

The ability to deliver this increased return to our shareholders reflects the success of our integrated operations and marketing strategy, enhanced product mix as well as the strength of demand for iron ore.”

The Eliwana and Iron Bridge projects represents a total investment of US$3.875 billion. The company said it positions the business able to deliver its products with an iron ore grade of more than 60%.

Fortescue said a key driver of the dividend increase is Fortescue’s cashflow generation after the increase in realised iron ore prices since the start of the year which saw a 47% increase in the March quarter average realised price to US$71 per dry metric tonne (dmt).

Is Fortescue A Buy?

Who knows how much further iron ore prices will rise, or whether it will stay at this level? I’m not a fan of investing in commodity businesses, particularly when they at a high point of the price cycle, so I am personally going to avoid investing in Fortescue.

I would rather invest in one of the reliable and proven ASX shares in the free report below.

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