Fortescue shares offer slice of Andrew Forrest’s green dream

Billionaire Andrew Forrest’s vision of a green energy and green steel future has prompted me to invest in his business.

Twenty minutes after Dr Andrew Forrest finished speaking about green hydrogen at the National Press Club late last week, I bought shares in his company Fortescue Metals Group.

It may seem like an impulse buy, but it wasn’t. It’s simply my belief that money will be made by jumping on the zero-carbon train and that we need to create a better future for our planet.

Also, Fortescue shares could be a good buy at today’s prices and have a current dividend yield near 25 per cent – the highest I’ve ever seen for a top 20 ASX stock.

Fortescue itself is not a green energy company.

It’s one of the world’s biggest iron ore producers, and has been responsible for millions of tonnes of CO2 emissions over the years while building a massively profitable business and becoming one of the best performers on the ASX.

But billionaire Dr Forrest is leading the charge to transform the business, get other heavy carbon emitters and their customers to do the same, bring politicians on-board and create new climate-friendly industries in Australia.

Last week Fortescue subsidiary Fortescue Future Industries announced it would soon build a factory in Queensland to manufacture equipment for hydrogen and other renewable energy – part of a $1 billion-plus plan to double the world’s green hydrogen production capacity.

Andrew Forrest’s mining success has spurred a shift to green energy and steel. Pic: supplied

Green hydrogen is a clean energy source that is produced through electrolysis that separates water into hydrogen and oxygen, with the entire energy-intensive process powered by renewables.

Fortescue is not only cutting its own emissions to zero – it also plans to remove its customers’ emissions too. That means all the pollution created by steelmakers that use Fortescue’s iron ore, and it’s a much bigger job than simply turning its own mining operations carbon neutral.

Dr Forrest is putting his money where his mouth is, pumping 10 per cent of Fortescue Metals Group’s annual profits in Fortescue Future Industries to fund renewable energy growth: that’s hundreds of millions of dollars a year.

Fortescue’s renewable energy push isn’t the only reason I’ve invested in it. Others include.

• A share price that has dropped 46 per cent since July, following the downward trajectory of the iron ore price. The company will still make huge profits even if iron ore drops further, and its expansion from raw materials supplier to green steel maker in the coming decade isn’t factored in.

• A dividend yield of 25 per cent, which just sounds crazy. It’s based on the company’s latest mega-profit that was boosted by a mega-high iron ore price, but even when profits and dividends fall Fortescue will still be paying investors much, much more than cash in the bank. Successful miners were previously low dividend payers – not any more.

• Its position as one of the biggest players in Australia’s renewable energy sector. Most investors wanting to buy into the zero-carbon and renewable energy theme look offshore to global giants such as Tesla.

Fortescue is a true Aussie success story – Dr Forrest also owns bush outfitter RM Williams – with a proven track record of rewarding shareholders.

I haven’t owned an individual company share since late 2018, when I sold out of direct shares (including Fortescue) to focus on exchange traded funds and superannuation. But the future of Fortescue appears too bright to resist.

Originally published as Fortescue shares offer slice of Andrew Forrest’s green dream