Is the Fortescue share price a buy ahead of next week’s quarterly update?

The Fortescue Metals Group Ltd (ASX: FMG) share price has risen over the last few weeks. In fact, it’s up 10% since the quarterly update for the three months to 31 March 2023 was released on 24 April. In this article, I’m going to look at whether it’s a good time to buy Fortescue shares before the next quarterly update.

The first thing we should consider is the iron ore price and the company’s iron ore operations.

Should iron influence the decision?

Fortescue has proven to be a very effective ASX iron ore share. But we can’t escape from the fact that its shorter-term profits are heavily influenced by what the iron ore price is doing.

According to Trading Economics, the iron ore price is currently sitting at around US$116 per tonne, which is significantly better than where it was two months ago in May when the price dipped below US$100 per tonne.

The ASX mining share can make good profits at this price and the business can capitalise even more thanks to the start of production at the higher-grade iron ore project Iron Bridge.

It is curious that the iron ore price has remained relatively strong amid weakness in China. Rio Tinto Ltd (ASX: RIO) just released its quarterly update and said “China’s economic recovery has fallen short of initial market expectations, as the property market downturn continues to weigh on the economy and consumers remain cautious despite monetary policy easing. Manufacturing data in advanced economies showed a further slowdown and recessionary.”

Consumption is “improving”, but weakness in the property sector is “providing a drag to growth.” Factory activity has “slowed down” as manufacturing PMI contracted. But, Rio Tinto did note that the Chinese government has stepped up monetary easing measures, while Chinese steel exports “trended up sharply”.

Fortescue’s production and the iron ore price are good for earnings, but underlying conditions in China don’t suggest to me that the iron ore price is going to go to US$150 per tonne any time soon, though it doesn’t need to.

It’s quite possible the iron ore price could fall from here, which would open up better buying opportunities for investors. However, today’s Fortescue share price could still be attractive for the dividends and green energy side of things.

Dividends and green energy could support the Fortescue share price

Currently, Fortescue is projected to pay an annual dividend per share of $1.25 in FY24. This would translate into a grossed-up dividend yield of 8.1% at the current Fortescue share price. If this is the payment, it would beat the yield of most of the S&P/ASX 200 Index (ASX: XJO) shares.

The company continues to make strong progress on its green projects which aims to make green hydrogen in the future. In the quarterly update, I imagine we’ll hear about more of the progress that the company has made. It has ‘priority projects’ in the USA, Australia, Brazil Kenya and Norway.

At some point, the green hydrogen, green ammonia and battery division of Fortescue Future Industries (FFI) could be a material earner, and this could be a good benefit for the Fortescue share price.

Foolish takeaway

I’m not worried about the separation of Andrew Forrest and his wife Nicola because they have said there isn’t going to be a change in the operation and goals of the company.

I am confident in the company’s long-term potential, but I’d be happy to wait for a cheaper Fortescue share price, and analyse the upcoming quarterly update, as some volatility could lead to a better entry point.