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(Refiles to remove duplicate "was" paragraph 6, corrects spelling of Billiton in paragraph 14)
* Fortescue profit triples on lower costs
* Says on track to further increase dividend payout ratio
* Debt coming down
By James Regan
SYDNEY, Aug 22 (Reuters) - Australia's Fortescue Metals Group Ltd, the world No. 4 iron ore producer, reported a tripling of its annual net profit on Monday to nearly $1 billion and said it could shoulder a big jump in future dividend payouts.
Fortescue surpassed analysts' forecasts by boosting its final dividend by 500 percent to A$0.12 ($0.90) a share for fiscal 2016, taking its total payout for the year to 36 percent of net profit.
With iron ore prices holding up better than expected and an attack on production costs and debt, the company's payout ratio could exceed its 40 percent target "in the not too distant future," Chief Executive Nev Power told an analysts' call.
Power said global iron ore supply was now in balance with demand, while China's ability to produce half the world's steel was underpinning the company's prospects.
Fortescue, which has built Australia's third-biggest iron ore miner over the past decade to feed demand in China, reported a net profit of $985 million for the year to end-June, up from $317 million a year ago.
The figure was ahead of the $895 million average forecast of 13 analysts polled by Thomson Reuters I/B/E/S.
Power said Fortescue was maintaining the flexibility to continue early debt repayments or refinancing to further cut debt, which stood at $5.2 billion on June 30.
"As we reduce debt, there will be more cash flow available to pay dividends going forward," Power said on a post-earnings call. "It's very sustainable."
The jump in the company's final dividend took its payout for the year to A$0.15 a share.
Fortescue had produced a "clean result", UBS analyst Glyn Lawcock said, with revenue and earnings ahead of UBS estimates.
"We expect the market to focus on sustainability of the higher dividend, which ultimately comes down to price," he said in a note.
Revenue slid 17 percent to $7.1 billion but the company said it cut costs 43 percent, while capital spending more than halved.
Power also stuck to an earlier forecast of lowering Fortescue's production cost target for fiscal 2017 to $12-$13 per wet tonne from $15.43 in fiscal 2016.
This would put it on par with larger rivals Vale, Rio Tinto and BHP Billiton , which combined control more than 70 percent of global sea trade in iron ore.
Iron ore .IO62-CNI=SI was selling for $61 a tonne on Monday. The price has climbed 13 percent since July 1.
Fortescue shares dipped 2 percent cents on Monday to A$4.83, but have still more than doubled so far this year.
$1 = 1.3189 Australian dollars Reporting by James Regan; Additional reporting by Byron Kaye; Editing by Richard Pullin