Is RIO TINTO A Real Gem Among ASX Dividend Payers?

Is RIO TINTO A Real Gem Among ASX Dividend Payers?

Blue-chip stock Rio Tinto Limited (ASX: RIO) is an exploration, development and mining company with operation in around 35 countries across 6 continents. It boasts in pioneering various technological innovations, such as their ‘mine of the future’ program and its low carbon dioxide aluminium from hydropower. Their products such as copper and aluminium, gold, diamonds, and industrial minerals, uranium, and iron ore have wide industrial usage. It operates open pit, mills, underground mines, refineries, power stations and smelters, research and service facilities to their customers via rail, ships and ports network.

It recently announced its Annual Report 2018, where it reported $11.8 Bn in cash from operations where $8.6 Bn cash came from divestments. Its consolidated sales revenue increased to $40.5 Bn with major credit to its copper assets which delivered 33% y-o-y increased mined production followed by iron ore shipments and production. Revenue realized through bauxite and aluminium were slightly lower as compared to the previous year.

It reported EBITDA at $18.1 Bn with a margin of 42%. Its Return on Capital employed turned out to be 19% with the underlying earnings of $8.8 Bn. Its net debt reduced to $4.1 Bn. Owning to huge cash pile from the operation, the company board declared a dividend of around $5.8959 with payment date on April 18, 2019, and record date on March 8, 2019.

Its Musci Hall/Old Vic deposits which are located within the Hamersley  Basin of Western Australia (WA) has reported an increase of Marra Mamba ore by 225 Mt, and Detrital ore by 58 Mt. Reverse circulation drilling carried out at Music Hall between 2014 and 2015 resulted in a total of 116 holes for 9,497 m whereas drilling at Old Vic between 2015 and 2017 resulted in a total of 154 holes for 22,073 m.

Its Western Hill has reported resource addition to Robe River JV where Brockman ore deposits added 112 Mt, Brockman process ore 42 Mt, and Detrital ore 12 Mt. Reverse circulation drilling resulted in a total of 446 holes for 36,600 m. In total, Rio’s mineral resource closing number for 2018 stood at 23,319 Mt from 22,538 Mt in the year 2017.

In 2019, the company expects to face geopolitical uncertainties as global trade tensions are yet to settle and there may be high volatility in commodity prices. However, due to its strong balance sheet, best-talented staff, world-class assets, and the ability to invest throughout the business cycle, would help it to maintain sustainable growth in the forthcoming year.  With the expectation of high cash outflow in the year 2019 including special dividend worth $4 Bn, the company may face an increase in its net debt in the first half of the year.

On the stock information front, Rio Tinto’ shares last traded at $90.60, down 0.157% (ASX 4:00 PM on March 8, 2019) with the market capitalization of ~$34.17 Bn. It is current trading at PE multiple of 8.19x with divided yield of 4.58% which is higher than the metal and mining Industry median of 3.2%, representing real gem in term of income among peers for its shareholders. Rio is trading close to its 52 weeks higher of $97.29 with average volume of 2,011,150. Its absolute return for 3 months, 1 year, and 5 years are 31.90%, 26.62%, and 46.89%, respectively.


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