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.
