The Fortescue Ltd (ASX:FMG) share price is down 35.4% since the start of 2024. At the same time, the Coles Group Ltd (ASX:COL) share price is 6.4% away from its 52-week high. This brief article explains why it could be worth adding FMG and COL shares to your ASX investing stock watchlist.
FMG share price in focus
Fortescue Ltd is an iron ore production and exploration company with assets located in the Pilbara region of Western Australia. The company was founded in 2003 and is headquartered in Perth.
Fortescue’s main operation is in iron ore production, shipping more than 190 million tonnes annually. However, Fortescue has also been ramping up exploration activities across Australia, Argentina, Chile, Brazil, and Kazakhstan for materials like copper, rare earths, and lithium.
This is part of Fortescue’s long-term strategy to take advantage of the shift to renewable energy. Demand for copper, lithium, and other rare earths are expected to skyrocket and Fortescue intends to fill that demand.
COL shares
Coles is an Australian retailer providing customers with everyday products including fresh food, groceries, general merchandise, liquor, fuel and financial services. It was founded in 1914 in Victoria which it still calls its home base.
Coles was formerly owned by conglomerate Wesfarmers from 2007 until 2018, when it was spun-off and listed as a separate entity on the ASX under the ticker symbol ‘COL’. Coles’ earnings are dominated by the supermarkets side of the business, however, it partly or fully owns or operates adjacent businesses like flybuys, Liquorland, First Choice, Vintage Cellars, Coles Express and more.
While Coles is in a way the ‘little brother’ to Woolworths, it still controls a significant share of the Australian grocery market (about 28%). In its short time as its own listed entity, Coles has established itself as a handy and reliable dividend payer.
FMG share price valuation
We would consider FMG to be a ‘mature’ or ‘blue-chip’ business, so some of the metrics that might be important to us include the debt/equity ratio, average yield, and return on equity, or ROE. For FY24, Fortescue Ltd reported a debt/equity ratio of 27.6%, meaning the company has more equity than debt.
Over the last 5 years, FMG has delivered an average dividend yield of 10.5% per year. This is important to note if you’re looking for income from your investments.
Finally, in FY24, FMG reported an ROE of 30.2%. For a mature business you generally want to see an ROE of more than 10%, so FMG clears this hurdle.
In FY24, Coles Group Ltd reported a debt/equity ratio of 278.4%, meaning the company is leveraged.
As for dividends, since 2019 COL has achieved an average dividend yield of 3.8% per year, and in FY24 reported an ROE of 32.4%
It’s important to keep in mind that these are only a selection of metrics and don’t give us enough information to value the business or make an investment decision. To learn more about valuation, I’d recommend checking out one of our free online investing courses.
