The Fortescue Metals Group Limited (ASX: FMG) share price has dropped 15% in the past month.
This doesn’t compare well to the ASX 200 (ASX: XJO), which is only down by 7.1% over the same period.
When Fortescue drops this low, I think it could be interesting to look at.
Fortescue share price pain
Resource businesses are notoriously volatile and cyclical. No-one can say that a resource company’s profit can grow year after year, because resource prices are volatile and unpredictable.
Therefore, I think when Fortescue drops it could be an opportunistic time to consider investing, if investors are interested in the iron ore miner.
The current Fortescue share price of just under $16 is the lowest it has seen in 2022. That’s despite the progress with the Iron Bridge Magnetite Project and the interesting development of a potential project in Africa called Belinga
.
Plus, Fortescue Future Industries (FFI) has made good progress with finding customers for its future green hydrogen production.
For me, FFI is where the future value of the business is. But, I like that the iron ore division can help fund FFI as Fortescue allocates 10% of its net profit each year to Fortescue Future Industries.
Weakness in the iron ore price and the knock-on effect to the Fortescue share price, gives us the opportunity to buy a stake of the business at a cyclical low. Of course, it could go lower from here, but it’s impossible to know where the bottom of the decline will be.
But, in 2022, a Fortescue share price of around $16 seems to be a good ‘buy the dip’ level.
Don’t forget the dividend
Fortescue aims to pay investors a large dividend. Even if profit does sink between now and FY24, the dividend yield for investors could still be attractively high.
Commsec has an estimate of a dividend per share of $1.126 for FY24. At the current Fortescue share price, it’s expected to pay a dividend yield of 10% for FY24, including the franking credits.
But, investors wanting a smoother ride may want to look at other ASX dividend shares.
