Is the Fortescue share price a buy for its dividend yield?

Investing at the current Fortescue Ltd (ASX: FMG) share price could unlock a sizeable dividend yield. However, that's partly because the ASX mining share has fallen significantly in recent months.

When a share price falls, it boosts the potential dividend yield on offer. For example, if a company has a 5% dividend yield and the share price falls 10%, the dividend yield becomes 5.5%.

Looking at the performance of the Fortescue share price, it's down 35% year to date at the time of writing.

However, analysts expect the Fortescue dividend to fall significantly in FY27, so investors shouldn't assume the FY26 payout of $1.08 per share will be repeated.

Let's take a look at what the payout may be and how large the dividend yield could be.

Potential dividend yield

If the lower iron ore price persists during the 2027 financial year, it could be a tough year for the company.

It released its FY27 first-quarter update on 22 October 2026, which showed that the hematite (iron ore) realised (sold) price was US$79.79 per dry metric tonne (dmt), down 10% year over year. At the same time, hematite C1 (production) unit costs increased 21% year over year to US$21.98 per wet metric tonne (wmt).

That combination of lower revenue and higher costs could have a challenging impact on profitability and a painful flow-on effect to the dividend.

Using the current projection on CMC Invest, the Fortescue FY27 dividend per share is forecast to fall to 47.1 cents. That would represent a year-over-year decline of approximately 56%.

At the current Fortescue share price of $14.38, that translates into a possible dividend yield of 3.25% excluding franking credits and 4.7% including franking credits.  

I'll note that the dividend is forecast to increase to 57 cents per share in FY28, according to CMC Invest. That would represent a dividend yield of 4% excluding franking credits and 5.7% including franking credits.

Considering the huge dividend yields of well over 10% it was providing to shareholders earlier this decade, the passive income now looks significantly less appealing.

Is the Fortescue share price a buy?

With China looking to negotiate more regarding Fortescue's iron ore, which Fortescue referred to in its FY27 first-quarter update,  I'm not sure high iron ore prices are going to return any time soon.

In previous years, I've suggested Fortescue can be a cyclical opportunity to ride as the iron ore price changes (namely 'buy low'), but I'm less confident about a compelling recovery these days, partly because of increasing supply of iron ore from Africa (namely the Simandou project which Rio Tinto Ltd (ASX: RIO) is involved in), which may be a permanent headwind for the iron ore price. Therefore, I wouldn't buy Fortescue shares today.

According to CMC Invest, there have been nine analyst ratings on the business within the last three months, with two buy ratings, three hold ratings and four sell ratings. Analysts are leaning more negative on the business, so it could be wise to look for other opportunities instead.

The post Is the Fortescue share price a buy for its dividend yield? appeared first on The Motley Fool Australia.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2026