Here’s the Rio Tinto dividend forecast for 2022 and 2023

Last year, Rio Tinto paid out a monster dividend to shareholders. Here’s a look at the divi forecasts for this year and next.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Close-up of British bank notes

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Rio Tinto (LSE: RIO) is one of the highest-yielding stocks in the FTSE 100 index. Last year, the mining giant paid out total dividends of $10.40 per share, which equates to a trailing yield of about 18.2% at the current share price. Here, I’m going to look at the Rio Tinto dividend forecast for 2022 and 2023. I’ll also discuss whether I’d buy this income stock for my portfolio today.

Rio Tinto dividend forecasts

At present, analysts expect Rio Tinto to continue paying big dividends this year and next. However, the payout is not expected to be as large as the one last year (which included some ‘special’ dividends).

Currently, the dividend forecast for 2022 is $7.22 per share. Meanwhile, the estimate for 2023 is $5.65 per share. At the current share price and exchange rate, these projected payouts translate to yields of 12.6% and 9.9% respectively. These yields are obviously still massive, even if they’re below the trailing yield of 18.4%.

A word of warning though – dividend forecasts can be way off the mark at times. So, there’s no guarantee that Rio will pay these kinds of distributions. And I’ll point out that dividend forecasts for Rio tend to fluctuate more than the forecasts of some other popular FTSE 100 income stocks.

When I last covered Rio in May, for example, analysts were expecting dividends of $8.83 per share for 2022. Since then, the forecast has fallen by 18%. It may continue to fall further depending on what happens in the commodity markets.

Would I buy Rio Tinto shares for income today?

As for whether I’d buy Rio Tinto shares for income, I don’t see them as a good fit for my portfolio.

Sure, the yield looks attractive right now. And the valuation is quite attractive too. Currently, the stock has a forward-looking P/E ratio of just 5.5 – well below the average FTSE 100 P/E.

The thing is though, Rio Tinto is a highly ‘cyclical’ company and as a result its share price is extremely volatile. This is illustrated by the fact that since early June, the stock has fallen from above £60 to near £48.

This is not what I want from an income stock. Because share price losses could potentially wipe out my gains from dividend income. If I had bought it at £60 in early June, for example, I’d now be sitting on a near-20% loss. So, while I may be set to pick up some big dividends, I could end up losing money overall.

I prefer income stocks that are a little more stable, such as Unilever and Diageo. These kinds of stocks are more ‘defensive’ in nature and less likely to experience massive share price swings.

Another issue with Rio is that it has very little control of its revenues and earnings. If commodity prices were to plummet, its revenues and profits would most likely plummet too. That’s not ideal from an income-investing perspective. I want companies that are in charge of their own destiny and can raise their dividends steadily over time as sales and profits rise.

So, I’m happy to give Rio Tinto shares a miss. The dividend forecast is attractive, however, all things considered, I think there are better income stocks out there for me.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Edward Sheldon has positions in Diageo and Unilever. The Motley Fool UK has recommended Diageo and Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Snowing on Jubilee Gardens in London at dusk
Investing Articles

Could December be a great month to buy UK shares?

Christopher Ruane sees some possible reasons to look for shares to buy in December -- but he'll be using the…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

Sticking to FTSE shares, I’d still aim for a £1,000 monthly passive income like this!

By investing in blue-chip FTSE shares with proven business models, our writer hopes he can build sizeable passive income streams…

Read more »

Growth Shares

BT shares? I think there are much better UK stocks for the long term

Over the long term, many UK stocks have performed much better than BT. Here’s a look at two companies that…

Read more »

British Pennies on a Pound Note
Investing Articles

After a 540% rise, could this penny share keep going?

This penny share has seen mixed fortunes in recent years. Our writer looks ahead to some potentially exciting developments in…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing Articles

Is the S&P 500 going to 10,000 by 2030? This expert thinks so

One stock market strategist sees animal spirits taking hold and driving the S&P 500 index even higher by the end…

Read more »

Investing Articles

I’m expecting my Phoenix Group shares to give me a total return of 25% in 2025!

Phoenix Group shares have had a difficult few months but that doesn't worry Harvey Jones. He loves their 10%+ yield…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

14.5bn reasons why I think the Legal & General share price is at least 11% undervalued

According to our writer, the Legal & General share price doesn’t appear to reflect the underlying profitability of the business. 

Read more »

Young black man looking at phone while on the London Overground
Value Shares

After a 16% drop, FTSE 100 stock JD Sports Fashion looks like a steal to me

This FTSE 100 stock has tanked since mid-September. Edward Sheldon believes that there's value on offer after the share price…

Read more »