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.