Miners BHP (LSE: BHP), Rio Tinto (LSE: RIO) and Glencore (LSE: GLEN) are popular income stocks. In recent years, these companies have rewarded shareholders with some big cash payouts. Can investors expect high yields next year? Let’s take a look at the dividend forecasts for 2024.
Rio Tinto
Starting with Rio Tinto, analysts expect it to reward investors with a dividend payout of $4.54 per share for 2024. At today’s share price and exchange rate, that translates to a yield of about 6.5%
Earnings of $7.44 per share are projected for the year, giving a dividend coverage ratio (a measure of dividend safety) of about 1.6, which isn’t bad (ideally I like to see a ratio of two).
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Now, 6.5% is obviously a pretty decent yield. That’s well above the FTSE 100 average (roughly 3.5%).
But investors should be aware of the risks here. Rio Tinto’s fortunes are largely tied to the iron ore price. If it was to fall, due to economic weakness for example, investors might be looking at lower dividends as well as a lower share price.
It’s worth pointing out that dividend forecasts can be inaccurate at times.
BHP
Turning to rival BHP, it’s a little unique in that its financial year ends on 30 June. So I’m going to provide the dividend forecasts for both the year ending 30 June 2024 (FY2024) and 30 June 2025 (FY2025).
For FY2024, the forecast is currently $1.54 per share. For FY2025, it’s $1.49 per share. These estimates translate to yields of 4.9% and 4.8% at today’s share price and exchange rates.
Dividend coverage stands at 1.8 for FY2024 and 1.7 for FY2025.
The yields here are attractive. But again, the iron ore price is a risk factor. So is the copper price, as this is BHP’s second largest commodity by revenue.
If either of these were to crash in 2024, investors may be looking at negative returns.
Glencore
Finally, we have Glencore, which is currently forecast to pay out 23.3 cents per share for 2024. That equates to a yield of about 4.1% at today’s share price and exchange rate – the lowest of the three commodity companies.
Earnings are expected to come in at 50 cents, giving a dividend coverage ratio of about two, which is healthy.
Now, one thing to understand about Glencore is that it’s both a miner and a commodity trader. So there’s an extra layer of risk here.
Not only do investors face traditional mining risks (eg lower commodity prices, operational setbacks, etc) but they also face trading risk. If the company was to rack up a stack of losses from trading, investors could lose out.
My pick of the three
As for my pick of the three, I’d probably go with BHP. Its yield isn’t as high as Rio’s. But I like the fact it has a lot of exposure to copper, which is likely to be in high demand in the years ahead, due to the renewable energy shift.
That said, if I was building a portfolio for income today, I’d mainly focus on other sectors. For me, miners are just too unpredictable.
