Fortescue's record year delivers a smaller dividend for shareholders

Fortescue (FMG) delivered few surprises in its FY26 result after flagging record iron ore shipments, a soft FY27 outlook and an impairment at its Iron Bridge project in its quarterly last month.

Today’s full-year results added the earnings data and the payout to shareholders, with underlying profit up 3% on a stronger iron ore price and the board declaring a fully franked final dividend that held the payout ratio steady at 65%.

"Our record operating performance this year underpinned a 9% increase in Underlying EBITDA and a 25% increase in free-cash-flow. We invested US$3.6 billion across the business and finished the year with US$5.1 billion in cash and net debt of just US$0.9 billion," said Fortescue Metals and Operations CEO Dino Otranto. 

With most of the bad news flagged last month, the stock is little changed in early trade, down 0.36% to $18 a share. 

Fortescue FY26 results in focus

• Final dividend: A$0.46 per share fully franked, down 23% vs A$0.60 a year ago. Total FY26 dividends A$1.08, down 2% vs A$1.10, worth A$3.3bn at a 65% payout ratio

• Iron ore shipped: 201.3Mt, up 1% year on year, a company record

• Revenue: US$16.97 billion, up 9% year on year

• Underlying EBITDA: US$8.6 billion, up 9% year on year, at a 51% margin

• Underlying NPAT: US$3.5 billion, up 3% year on year

• Statutory NPAT: US$2.9 billion, down 15% year on year, after US$598m of after-tax significant items

• Underlying EPS: US113 cents, up 3% year on year (A$1.66, down 2%)

• Free cash flow: US$3.2 billion, up 25% year on year

• Net debt: US$857 million at 30 June, down 23% year on year. 

Fortescue reported statutory net profit of US$2.86 billion, down 15% year on year, while underlying profit rose 3% to US$3.46 billion. The gap was caused by two one-off charges excluded from the underlying figure: a US$750 million pre-tax impairment of Iron Bridge, and a US$104 million pre-tax expense for compensation claim ordered by the federal court, together worth US$598 million after tax.

Revenue climbed 9% to US$16.97 billion, driven by a 7% increase in the realised hematite price, Fortescue’s main product, to US$90.66 a dry metric tonne and a 2% lift in sales volumes. Underlying EBITDA also rose 9%, but that did not carry through to the bottom line, with depreciation and amortisation up 15% to US$2.87 billion and exploration, development and other expenses up 64% to US$406 million.

Free cash flow increased 25%, helped by capital expenditure falling 7% to US$3.64 billion as spending came in at the low end of guidance. Net debt fell 23% to US$857 million against a cash balance of US$5.07 billion.

Fortescue earns in US dollars but pays dividends in Australian dollars, so a stronger Aussie meant underlying earnings per share rose 3% in US dollar terms but fell 2% to A$1.66, and the dividend followed it down. For Australian shareholders who hold FMG through to the September ex-dividend date, it will mean an approximate 7.6% 12-month dividend yield once franking credits are accounted for*.

Forward guidance

Fortescue warned in its June quarterly that FY27 shipments would be broadly flat at 197 to 207Mt while unit costs and capital spending both rise. Management's answer is productivity, and this year the pitch is artificial intelligence.

"AI is one of our biggest opportunities to create value and has the potential to change almost every aspect of how we operate,” said Otranto. “We're already putting it to work across drilling, processing, rail and haulage. Autonomy changed how we operated and helped drive our costs down. We see AI doing the same, but on a much broader scale."

Fortescue is also trying to become less reliant on diesel by building a 2.4GW renewable grid across the Pilbara. That build is where much of the extra spending is going, with decarbonisation capex guided to between US$0.9 billion and US$1.3 billion in FY27, up from US$848 million this year.

The bottom line 

Today's result confirmed the balance sheet is in good shape and the dividend policy held, but the market had already priced the shipments, the impairment and the guidance. What matters now is FY27, where flat volumes meet higher costs and a bigger capex bill. Investors must monitor whether the savings management is promising from AI and the green grid show up before the costs do. 

*Assumes hypothetical purchase price on 19 August 2025 at $19.69 and Australian resident shareholder. Unfranked yield is 5.5%.