Price surge puts iron into Twiggy's donation A FORECAST surge in dividend flows from Andrew Forrest's one-third stake in Pilbara iron ore producer Fortescue Metals more than covers his $65 million donation (over 10 years) to fund research at Western Australian universities. Many times over. According to analysts, there is an expectation that should iron ore prices hold on to much of their current elevated levels, Mr Forrest's annual collect in dividends could run as high as $500 million in 2016. That would leave more than enough in the family budget for the WA research donations, and a matching commitment to the rest of Australia's universities if Mr Forrest becomes so inclined. Iron ore prices have defied the "bears" on the China growth story and have held at more than $US130 a tonne. Even allowing for a retreat in prices to $US115 a tonne, Fortescue is tipped to generate free cash of $US2 billion ($2.1bn) this financial year and to bring its debt burden under control by reaching a targeted 40 per gearing level in 2015. All that has prompted Citi analysts to dub Fortescue as a yield "play" come 2016, when Fortescue's dividend payout could climb from the current US10c a share to US41c (or US50c a share at current higher spot prices for iron ore). Mr Forrest's shareholding in Fortescue was last stated at 1.01 billion shares, or 32.4 per cent of the $16.3bn company. He formed the company 10 years ago with a group of Fortescue's early pioneers "who sat around my kitchen table poring over maps of underexplored, huge Pilbara lands." Citi forecasts that when gearing has reached the targeted 40 per cent range, Fortescue's dividend payout ratio will increase to the mid-point of the 30-40 per cent range, which implies a dividend yield of 8 per cent in 2016. Fortescue's yield potential was again a factor in the stock rising 29c to $5.26 a share yesterday. That increase alone added $293m to the value of Mr Forrest's stake in Fortescue, taking it to $5.3bn. But the company is highly leveraged to the iron ore price and the US exchange rate. In September-October last year, any thought of dividend payments was temporarily abandoned when iron ore plunged to less than $US80 a tonne. It recovered to the $US133.60 this week.