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Can Rio Tinto shares really pay a dividend yield of 18% in FY22?

Rio Tinto is expected to pay a large dividend in FY22. But how big will it be?
The post Can Rio Tinto shares really pay a dividend yield of 18% in FY22? appeared first on The Motley Fool Australia. –

Rio Tinto Limited (ASX: RIO) is one of the largest dividend payers on the ASX. But how big is the dividend going to be in FY22? It seems some analysts think the dividend yield is going to be very large indeed.

The ASX miner produces a significant amount of iron ore each year. With the iron ore price currently sitting at approximately US$150 per tonne, the company is projected to continue to generate elevated levels of profit, cash flow, and dividends.

Analysts have had their latest say on the business after Rio Tinto’s quarterly update.

First-quarter production

Rio Tinto reported that its Pilbara iron ore production of 71.7mt in the three months to 31 March 2022 was down 8% compared to the first quarter of 2021 and down 15% compared to the fourth quarter of 2021.

Compared to the fourth quarter of 2021, bauxite production was up 4%, aluminium production was down 3%, and mined copper production was down 5%.

The company said that its Pilbara operations had a challenging first quarter because mine depletion was not offset by mine replacement projects. This was attributed to the delayed commissioning of Gudai-Darri mine although the first ore there is still forecast for the second quarter of 2022.

There have also been ongoing commissioning challenges at the Mesa A wet plant, which is still impacting the production ramp-up at Robe Valley.

The ASX mining share also said that COVID-19 constraints impacted labour supply as it experienced increased cases in the Pilbara after the WA border reopening in March.

In terms of the iron ore price, it rose 33% over the quarter. Rio Tinto reported:

[S]upply concerns due to the war in Ukraine has outweighed muted demand growth and a crackdown on speculative trading behaviour in China. China’s economy is getting a boost with infrastructure spending, but COVID-19 lockdowns pose downside risks to near-term construction activity.

How big is the Rio Tinto FY22 dividend going to be?

Citi, which rates Rio Tinto as a buy with a price target of $135, thinks the FY22 dividend the company is going to pay could translate into a grossed-up dividend yield of 17.8%, thanks to the elevated iron ore price.

There are plenty of other analysts that also think that Rio Tinto is going to pay a large dividend in FY22.

Macquarie also rates Rio Tinto as a buy, with a price target of $140. The broker thinks that the ASX mining share is going to pay a grossed-up dividend yield of 16% in FY22 with the strong iron ore price expected to help in the shorter term.

Credit Suisse is another broker that rates Rio Tinto as a buy, with a price target of $138. The broker has projected that Rio Tinto is going to pay a grossed-up dividend yield of 13%.

Rio Tinto share price snapshot

Despite the volatility, since the start of 2022, the Rio Tinto share price has risen around 9%.

The company has a current market capitalisation of just over $40 billion.

The post Can Rio Tinto shares really pay a dividend yield of 18% in FY22? appeared first on The Motley Fool Australia.

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More reading

ASX 200 mining stocks just ended a dire week of trade. What’s next?

Dividend beasts: 5 ASX 200 shares with the highest dividend yield right now

Top brokers name 3 ASX shares to buy today

The Rio Tinto dividend was paid today. Here’s the lowdown

Is the Rio Tinto share price in the buy zone after its quarterly update?

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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