Can Rio Tinto shares deliver 20% growth AND a juicy dividend yield in the coming year?

Rio Tinto Limited (ASX: RIO) is one of the biggest dividend payers in Australia. Some analysts think its shares are undervalued and that it can pay a large dividend.

The ASX mining share is one of the biggest iron ore miners, along with BHP Group Ltd (ASX: BHP) and Fortescue Metals Group Limited (ASX: FMG).

Rio Tinto is making a lot of profit at the moment with many commodity prices higher than they have been in recent years.

The iron ore miner paid a large dividend in FY21 and analysts are expecting another large annual dividend in this financial year.

Dividend expectations

The broker Macquarie thinks that Rio Tinto is going to pay a grossed-up dividend yield of 16.5% in FY22 and then 11.4% in FY23. So, Macquarie thinks that double-digit yields are going to come from Rio Tinto in the next couple of years.

Ord Minnett has some estimates on Rio Tinto’s upcoming dividends as well. This broker has projected a grossed-up dividend yield of 15.5% in FY22 and 12% in FY23.

However, the broker Morgans is a bit less optimistic about the size of the next few dividends. Morgans has predicted a grossed-up dividend yield of 13.9% in FY22 and 10.6% in FY23.

The consensus seems to be that Rio Tinto shareholders are going to keep receiving bucketloads of cash in the next two financial years.

But does the Rio Tinto share price offer good upside?

Macquarie certainly thinks so with a buy rating and a price target of $140, implying a possible upside of more than 25% over the next 12 months.

The broker notes the efforts by Rio Tinto to increase its copper exposure, which is important for the company’s planned growth.

Ord Minnett is less optimistic about the business. It only rates the miner as a hold, with a price target of $116. That implies a mid-single-digit potential rise of the Rio Tinto share price in the next 12 months.

A key reason for the rating is that shipments have been disappointing and the broker doesn’t think that Rio Tinto will perform well when it comes to the guidance.

Morgans also has a hold rating on the business, with a price target of just $114. At the moment, commodity prices are helping Rio Tinto even though it has been disappointing on the mining operations side of things.

Latest update

In the three months to 31 March 2022, Rio Tinto said that its iron ore shipments were down 15% quarter on quarter to 71.5mt. Aluminium production was down 3% quarter on quarter to 738kt and mined copper production was down 5% quarter on quarter to 125kt.

Rio Tinto share price snapshot

Despite all of the volatility in 2022, the Rio Tinto share price has managed to rise by more than 10% this year.

The post Can Rio Tinto shares deliver 20% growth AND a juicy dividend yield in the coming year? appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in Fortescue Metals Group Limited. 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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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