How big will the Rio Tinto dividend be next year?

A female worker in a hard hat smiles in an oil field.

A female worker in a hard hat smiles in an oil field.

If you’re an income investor, you will no doubt have considered the Rio Tinto Ltd (ASX: RIO) dividend at some point.

And there’s certainly good reason for this. The mining giant regularly shares a large portion of its profits with investors in the form of dividends.

This has seen billion of dollars returned to shareholders over the last few years, much to their delight.

But that was then and this is now. Will we be able to say the same in the future or are the dividend glory days behind us? Let’s take a look and find out.

Rio Tinto dividend forecast

According to a recent note out of Goldman Sachs, its analysts are expecting Rio Tinto to continue paying generous dividends for the foreseeable future.

After paying a fully franked US$4.92 per share dividend in FY 2022, Goldman expects an increase to US$5.36 per share this year. This equates to A$8.07 per share based on current exchange rates.

And with the Rio Tinto share price currently fetching $108.45, it will mean a sizeable 7.45% fully franked yield for income investors. Not bad considering the market average usually sits at around 4%.

What about next year?

Unfortunately, Goldman Sachs is expecting Rio Tinto’s earnings to soften a touch in FY 2024. It believes this will force the mining giant to cut its dividend to US$4.68 per share or A$7.04 in local currency.

The good news, though, is that this will still mean a greater than average dividend yield for investors of 6.5%.

Should you invest?

As well as expecting the Rio Tinto dividend yield to be large in the next couple of years, the broker also sees scope for its shares to rise meaningfully.

Goldman currently has a buy rating and $136.20 price target on its shares. This implies potential upside of 25% for investors from current levels.

All in all, the broker is expecting some very strong returns over the next 12-18 months. So, if you’re not averse to investing in the mining sector, it could be well worth considering Rio Tinto.

The post How big will the Rio Tinto dividend be next year? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro 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 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.

from The Motley Fool Australia

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