Should You Buy Fortescue Metals Shares at This Price?

What happened to the Fortescue Metals share price?

Shares of Fortescue Metals Group Ltd [ASX:FMG] soared more than 2.7% today as the iron ore price and steel futures in China continued to rise, and expectations increased that Fortescue may pay a higher-than-expected dividend this year.

Why did the FMG shares rise?

The Fortescue share price has risen 230% over the past year. It’s up nearly 22% since the start of this year.

The rebound in the iron ore price, which is now above US$92 per tonne, represents a doubling in price since early 2016. In addition, iron ore is a key component in steel, with steel prices climbing in anticipation of production cuts at key Chinese steel mills.

Add to that the view of several analysts who believe that Fortescue may pay a bigger dividend this year. Fortescue’s last dividend was 12 cents per share in September. The company is due to announce its next dividend this week, hence the 2.7% gain in the stock price today.

What now for Fortescue Metals Group?

Fortescue has been a popular candidate among short sellers (those who think the share price will fall). Despite that, the share price has been one of the best performers among the big stocks on the Aussie market.

That said, it’s reasonable to think that after the recent run, much of the good news is already baked into the stock price. This is surely a stock for speculators, not investors

By Kris Sayce

Kris Sayce, dubbed the ‘Jeremy Clarkson of Australian finance’, began as a London finance broker specialising in small-cap stock analysis on London’s Alternative Investment Market (AIM). Kris then spent several years at one of Australia's leading wealth management firms. A fully accredited advisor in shares, options, warrants and foreign-exchange investments, Kris was instrumental in helping to establish the Australian version of the Markets and Money e-newsletter in 2005. He is the Publisher, Investment Director and Editor in Chief of Australia's most outspoken financial news service, Markets & Money.

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