Thu. Jun 30th, 2022

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Fortescue Metals Group Limited (ASX: FMG) shares and BHP Group Ltd (ASX: BHP) shares have been getting plenty of attention this year.

And for good reason.

With iron ore prices surging above US $ 200 per tonne from May through July last year (currently at US $ 136 per tonne), the S & P / ASX 200 Index (ASX: XJO) mining giants have seen revenues and profits soar. And investors have been rewarded not just with higher share prices this year, but record dividend payouts.

At the current share price, BHP pays a 10.2% trailing dividend yield and Fortescue shares pay a whopping 14.7% yield, both fully franked.

Try getting that from your bank.

But for investors looking to add just one of the ASX 200 miners to their portfolios, which is the better buy? BHP or Fortescue shares?

BHP or Fortescue shares?

For some insight into that question, we turn to Ord Minnett (courtesy of The Australian).

According to the wealth manager, Fortescue’s operating track record beats that of BHP.

Fortescue “on balance is slightly ahead of its peers over the past decade with four upgrades and three downgrades” on its iron ore guidance, raising shipment guidance for the past three years, Ord Minnett noted.

“Fortescue’s shipment guidance has been lowered only once in the past seven years, in FY19 due to the impact from Cyclone Veronica.”

BHP, on the other hand, has had the same number of upgrades as downgrades, giving a slight edge to Fortescue shares.

“Overall, we still regard Fortescue as the best Pilbara operator, with recently increased FY22 shipments guidance of 185–188 million tonnes (Mt) looking achievable,” Ord Minnett analysts said.

Fortescue’s FY22 cost guidance is in the range of US $ 15.75 to US $ 16.00 per wet tonne.

Ord Minnett currently has a hold rating on Fortescue shares with a target price of $ 19. Fortescue shares, up 1.4% in early trade today, are currently trading for $ 21.

How has Fortescue been tracking?

So far in 2022 Fortescue shares have gained around 5%. That compares to a 5.8% loss posted by the ASX 200 and a 13% share price gain by rival BHP.

For longer-term investors, the Fortescue share price is up 330% in five years, compared to a 100% gain for BHP shares and a 24% gain delivered by the ASX 200.

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