Fortescue shares: Buy, hold, or fold?

A group of three men in hard hats and high visibility vests stand together at a mine site while one points and the others look on with piles of dirt and mining equipment in the background.

Image source: Getty Images

It’s been a rough year so far for shares in S&P/ASX 200 Index (ASX: XJO) iron ore (and green energy) favourite, Fortescue Metals Group Limited (ASX: FMG).

The stock has slumped around 16% year to date while the iconic index has dumped 13%.

The Fortescue share price last traded at $16.76. So, could it be about to embark on the path to recovery?

Most brokers think not. Let’s take a look at what experts are predicting for the future of the Fortescue share price.

What might the future hold for Fortescue shares?

Fortescue shares – like those of its fellow ASX 200 materials giants – are often heralded as a dividend haven. Indeed, the company is currently trading with a 12.36% yield, having offered investors $2.07 of dividends per share over the last 12 months.

On top of that, the company has likely garnered interest on the back of its green energy leg, Fortescue Future Industries.

But its apparent commitment to decarbonisation and the energy transition may dint its dividends, according to experts.

Goldman Sachs expects the company’s recently announced plan to decarbonise its Pilbara operations at a cost of US$6.2 billion to likely see its payout ratio drop from 75% to 50% from financial year 2024. Though, the company believes the move will deliver US$3 billion of cost savings by 2030 and payback of capital by 2034.

The broker has a sell rating and a $12.10 price target on Fortescue shares. That represents a potential 28% downside.

Macquarie and Morgan Stanley share similar concerns about the company’s dividends, The Australian reports.

They’re said to have respectively slapped the stock with underperform and underweight ratings and price targets of $14.30 and $15.15.

Meanwhile, UBS analysts are reportedly worried about iron ore prices, leading the broker to tip Fortescue as a sell and hit its shares with a $15.80 price target.

But not all experts are so bearish on the future of the Fortescue share price.

Morgans apparently believes the stock is trading at a decent price right now. It has a hold rating and a $17.30 price target on the company’s shares, as my Fool colleague James reports.

Though, the broker also offers a potentially disappointing outlook for Fortescue’s dividends. It’s expecting the company’s full-year payout to slip to 37 US cents by financial year 2026.

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