Q3 Earnings Alert! Plan early for this week’s stock reports with all key data in 1 placeSee list

Rio Tinto shares rebound with China's economic recovery and robust dividends

EditorHari Govind
Published 18-10-2023, 07:36 pm
© Reuters.
UK100
-
RIO
-
RIO
-
RIO
-

FTSE mining giant Rio Tinto (NYSE:RIO)'s shares have seen a 19% decline from their March peak this year, primarily due to market concerns about China's economic recovery after implementing severe lockdowns as part of a zero-COVID policy. Rio Tinto's performance is closely tied to China, the top global commodities buyer since the mid-90s, and any economic fluctuations in the Asian nation significantly affect the mining company.

However, recent indicators are showing signs of economic revival in China. The third quarter data revealed an unexpected 4.9% year-on-year growth, surpassing market forecasts of 4.4%. This upturn, along with Rio Tinto's resilient core business and high dividend yield, has made the stock appealing despite potential risks such as possible hitches in China's recovery or a potential global economic downturn.

On Tuesday, Rio Tinto reported its Q3 production results, which showed a 1.2% increase in iron ore shipments. These shipments are crucial for China's steelmaking industry and are predicted to constitute approximately 54% of Rio’s projected revenue this year. Additionally, the production of mined copper and aluminum, essential for China’s renewable power generation and electric vehicles respectively, also saw an uptick.

Last year, Rio Tinto paid out dividends of $4.92 per share, yielding 6.9%. Based on last year's dividend at today's exchange rate and share price, the yield is 7.7%, nearly double the FTSE 100’s current average payout of 3.8%. A £10,000 investment in Rio Tinto now could potentially yield £7,700 over ten years excluding gains from dividend reinvestment or share price appreciation.

Despite disappointing H1 results this year, Rio Tinto maintains its policy of distributing 50% of underlying earnings to shareholders. This commitment is supported by the company's robust dividend cover ratios of 1.66-1.67.

In conclusion, despite the recent drop in share price, Rio Tinto's resilient core business and high dividend yield make it an attractive investment opportunity, especially with signs of China's economic recovery.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.