Rio Tinto Ltd's Dividend Analysis
Assessing Rio Tinto Ltd's Dividend Sustainability and Growth Prospects
Rio Tinto Ltd (RTNTF) recently announced a dividend of $3.93 per share, payable on 2024-04-18, with the ex-dividend date set for 2024-03-07. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Rio Tinto Ltd's dividend performance and assess its sustainability.
What Does Rio Tinto Ltd Do?
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Rio Tinto is a global diversified miner. Iron ore is the dominant commodity, with significantly lesser contributions from copper, aluminum, diamonds, gold, and industrial minerals. The 1995 merger of RTZ and CRA, via a dual-listed structure, created the present-day company. The two operate as a single business entity, with shareholders in each company having equivalent economic and voting rights. Major assets included the Pilbara iron ore operations, a 30% stake in the Escondida copper mine, 66%-ownership of the Oyu Tolgoi copper mine in Mongolia, the Weipa and Gove bauxite mines in Australia, and six hydro-powered aluminum smelters in Canada.
A Glimpse at Rio Tinto Ltd's Dividend History
Rio Tinto Ltd has maintained a consistent dividend payment record since 2020. Dividends are currently distributed on a bi-annual basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Rio Tinto Ltd's Dividend Yield and Growth
As of today, Rio Tinto Ltd currently has a 12-month trailing dividend yield of 4.70% and a 12-month forward dividend yield of 6.24%. This suggests an expectation of increased dividend payments over the next 12 months. Over the past three years, Rio Tinto Ltd's annual dividend growth rate was 4.50%. Extended to a five-year horizon, this rate increased to 13.90% per year. And over the past decade, Rio Tinto Ltd's annual dividends per share growth rate stands at an impressive 16.40%.
Based on Rio Tinto Ltd's dividend yield and five-year growth rate, the 5-year yield on cost of Rio Tinto Ltd stock as of today is approximately 9.01%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-12-31, Rio Tinto Ltd's dividend payout ratio is 0.58.
Rio Tinto Ltd's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Rio Tinto Ltd's profitability 8 out of 10 as of 2023-12-31, suggesting good profitability prospects. The company has reported net profit in 9 years out of the past 10 years.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Rio Tinto Ltd's growth rank of 8 out of 10 suggests that the company's growth trajectory is good relative to its competitors. Rio Tinto Ltd's revenue has increased by approximately 10.80% per year on average, a rate that outperforms approximately 50.43% of global competitors. The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Rio Tinto Ltd's earnings increased by approximately 1.50% per year on average, a rate that outperforms approximately 40% of global competitors. Lastly, the company's 5-year EBITDA growth rate of 7.90%, which outperforms approximately 41.16% of global competitors.
Next Steps
In conclusion, Rio Tinto Ltd's robust dividend history and growth rates are indicative of the company's commitment to shareholder returns. The payout ratio underscores a sustainable dividend policy, while the profitability and growth metrics provide confidence in the company's future outlook. Investors considering Rio Tinto Ltd (RTNTF) for its dividend prospects should also take note of the company's solid fundamentals and potential for continued growth. For those seeking to expand their portfolio with high-dividend yield stocks, GuruFocus Premium users can utilize the High Dividend Yield Screener for informed investment decisions.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
