Best commodity stock to invest in June and beyond: Fortescue Metals

on May 27, 2021
Updated: Jun 24, 2022
  • Fortescue Metals stock appears to be bouncing back from last week’s pullback.
  • The company is one of the best dividend-paying stocks in the commodities sector.
  • With iron ore prices rising in the last 12 months, FMG is an exciting stock to buy in June.

Follow Invezz on Telegram, Twitter, and Google News for instant updates >

Shares of Australian iron ore mining company Fortescue Metals Group Limited (ASX:FMG) on Thursday bounced off the current monthly lows of about A$21.25 to reclaim the A$22 level. The pullback in the stock looks to be done and expectations for a sustained rebound coupled with a healthy dividend yield makes FMG one of the most exciting commodities stocks to buy in June.

Are you looking for signals & alerts from pro-traders? Sign-up to Invezz Signals™ for FREE. Takes 2 mins.

FMG stock looks exciting heading into June

Copy link to section

FMG is an Australian iron ore mining company with some of the best profit margins in the industry. The company recorded a net income of A$6.5 billion from a revenue of A$17.62 in 2020. Since then, iron ore prices have skyrocketed from under $100 per tonne to top $229. 

Although China’s condemnation of speculative pricing has pushed the price of iron ore lower to $183, it still remains notably higher on a year-over-year basis. In fact, the average iron ore price in 2021 stands above $160, while the average price for the quarter is even higher at $185.

Elevated iron prices should have a positive impact on the company’s fiscal fourth-quarter ending June 30, and the full-year results for 2021. Encouragingly, the company has a solid history of dividend increases and one would expect to see a healthy increase amid high iron ore prices.

Analysts are forecasting a dividend payment of A$5.40 per share for full-year 2021, and another A$4.12 in full-year 2022. Both figures translate to a dividend yield of 24.54% and 18.72%, respectively. 

These yields might look outlandish but the stock currently trades at a yield of 11% while its average dividend yield for the last five years is 7.87%. In March last year, the stock traded a dividend yield of 19.72%. FMG’s final dividend payable to shareholders as of August 30 will be declared on August 23. 

The stock trades at an exciting P/E ratio of just 8.37. In comparison, close peers Rio Tinto Limited (ASX:RIO) and BHP Group Ltd (NYSE:BHP) trade at trailing P/E ratios of 15.49 and 26.37, respectively. This makes FMG the more exciting commodity stock to buy. 

Source- TradingView

Technical overview

Copy link to section

Technically, shares of Fortescue Metals appear to be trading just below the 100-hour moving average. The stock is currently on a rebound after pulling back last week. This could be the perfect time to buy FMG stock as it continues to recover.

The bulls can target short-term profits at around A$22.65 or higher at A$23.52. Long-term profits can be targeted at A$24.89. Key support levels for FMG stock can be found at A$21.25 and A$20.38. Long-term support is located at A$18.98.

Bottom line: Buy FMG stock in June

Copy link to section

Fortescue Metals appears to be trading at a compelling P/E ratio compared to peers. The company also pays dividends at attractive yields. FMG is expected to maintain its dividend growth in the coming years. This could boost the stock price massively. FMG stock is the commodities stock to buy in June and beyond.

Rio Tinto Commodity Mining Stock Market