In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is on course to start the week with a solid gain. At the time of writing, the benchmark index is up 0.75% to 7,338.9 points.

Four ASX shares that have failed to follow the market higher today are listed below. Here’s why they are dropping:

Fortescue Metals Group Ltd (ASX: FMG)

The Fortescue share price is down 2.5% to $22.22. Investors have been selling Fortescue and other mining shares today amid concerns that demand for iron ore from China may not be as strong as hoped. This follows the release of China’s GDP target for 2023. It is targeting 5% growth with less of a focus on the infrastructure and property sectors.

Lynas Rare Earths Ltd (ASX: LYC)

The Lynas share price is down over 5% to $7.38. This rare earths producer’s shares have come under pressure recently after Tesla announced plans to shift away from using rare earths in its cars in the near future.

Myer Holdings Ltd (ASX: MYR)

The Myer share price is down 4% to 86 cents. This is despite there being no news out of the department store operator today. However, it is worth noting that Myer is scheduled to release its half-year results later this week. And with its shares up over 100% since this time last year, some investors may be taking a bit of profit off the table.

New Hope Corporation Limited (ASX: NHC)

The New Hope share price is down 4.5% to $5.51. This appears to have been driven partly by the release of a broker note out of Ord Minnett this morning. According to the note, the broker has downgraded the coal miner’s shares to hold rating with a $6.50 price target. It made the move on valuation grounds.

The post Why Fortescue, Lynas, Myer, and New Hope shares are dropping today appeared first on The Motley Fool Australia.

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More reading

• This ASX 200 dividend share failed to be one of the world’s biggest payers in 2022. Could it get worse?
• What’s moving the Fortescue share price this week?
• Here are the top 10 ASX 200 shares today
• Why is the Lynas share price being thumped on Thursday?
• Has this ‘completely changed the landscape’ for the future of Fortescue shares?

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.

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The latest expert views on two S&P/ASX 200 Index (ASX: XJO) healthcare shares have just come in.

It’s positive news for shareholders of both companies because the broker has improved the rating of those businesses.

Healthcare is an interesting sector for investing in. It’s seen as defensive because many of them can benefit from ongoing patient demand, regardless of the economic situation – most people don’t choose when to get sick. I’d imagine being alive and healthy is a priority for most people, so they’d be willing to spend on healthcare services.

But, there are also some positive tailwinds for the sector, including an ageing population, a growing population and increasingly advanced healthcare treatments.

Let’s look at two of the latest ratings.

Pro Medicus Limited (ASX: PME)

Pro Medicus describes itself as a leading medical imaging IT provider. It provides a range of radiology IT software and services to hospitals, imaging centres and healthcare groups around the world.

The broker Citi has just increased its rating on the ASX 200 healthcare share to neutral. Citi’s price target on Pro Medicus was raised to $61. A price target is where the broker thinks the share price will be in 12 months from when the call was issued.

Therefore, the broker doesn’t think the Pro Medicus share price is going to move much from here.

In the company’s FY23 half-year result, it reported that revenue went up 28.3% to $56.9 million, while net profit after tax (NPAT) improved by 31.5% to $27.2 million.

The Pro Medicus boss Dr Hupert said that the company’s pipeline remains strong:

We have a very good spread of opportunities across different market segments, with opportunities in academic/IDN, corporate and private markets. Pretty much all of them are cloud-based with a growing number looking for our “full stack” solution which includes all three of our modules, namely Viewer, Archive and Worklist; a trend we see continuing.

Sonic Healthcare Limited (ASX: SHL)

The other ASX 200 healthcare share that Citi likes the look of is Sonic Healthcare, the global pathology business.

Citi increased its rating on Sonic Healthcare to buy. The price target on Sonic Healthcare is $36. That implies a possible rise of 8% for the business.

While the business saw the FY23 half-year earnings drop as COVID-19 testing slowed, its profit is still significantly higher than the FY20 first half – the pre COVID times. Compared to HY20, the FY23 half-year total revenue was up 22%, operating cash flow was up 47% and net profit after tax (NPAT) was up 50%.

Its non-COVID testing revenue and earnings continue to grow, as does the dividend. It has a progressive dividend policy, meaning that the board wants to grow the dividend each year.

The ASX 200 healthcare share is focused on automation and other efficiency gains, as well as procurement savings, which could help it maintain and grow its margins.

Sonic Healthcare is also hoping to win more outsourcing contracts from hospitals and other healthcare providers. It’s also progressing “additional acquisition opportunities to add to future growth.”

The post 2 ASX 200 healthcare shares just upgraded by Citi analysts appeared first on The Motley Fool Australia.

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More reading

• For $200 in weekly passive income, buy 10,300 shares of this ASX 200 stock
• 3 ASX dividend stocks to try and turn $10,000 into $1 million!
• Why I’m more eager than ever to buy Sonic Healthcare shares following earnings
• 2 ASX shares to buy with exciting global growth potential: fund manager
• Here are the top 10 ASX 200 shares today

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Pro Medicus. The Motley Fool Australia has positions in and has recommended Pro Medicus. The Motley Fool Australia has recommended Sonic Healthcare. 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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The S&P/ASX 200 Index (ASX: XJO) definitely didn’t have as good a month in February as it did in January. But even so, the ASX 200 still remains up a healthy 5.5% in 2023 so far. But one ASX 200 tech stock has beaten the Index’s solid return six-fold over the year so far.

That would be the WiseTech Global Ltd (ASX: WTC) share price.

WiseTech shares have been on fire in 2023. The logistics software company was only going for $49.17 at the start of January, a good 30% less than the $63.96 a share it is asking today.

What’s more, today has seen a new record share price for WiseTech. This morning, WiseTech shares climbed as high as $64.86 each. Not only is that a new 52-week high for this ASX 200 tech share, but a new, all-time record high to boot.

So what’s behind WiseTech’s latest high and the rather epic share price run it has gone on over 2023 thus far? Well, it could come down to a couple of reasons.

Why has this ASX 200 tech stock rocketed 30% in 2023 to a new record high?

The first (and probably most important) is WiseTech’s continuing growth. It was only last month that WiseTech gave investors its latest report card.

And this half-year earnings report contained some pretty impressive figures for shareholders to digest. For the six months ending 31 December 2022, the company reported revenues of $378.2 million, up a healthy 35% over the previous period.

Earnings before interest, tax, depreciation and amortisation (EBITDA) were up slightly more, rising by 36% to $187.3 million. Underlying net profits after tax (NPAT) came in 40% higher than 2021’s numbers at $108.5 million.

All of this helped WiseTech to raise its 2023 interim dividend by a pleasing 39% to 6.6 cents per share.

So with these kinds of numbers on display, it’s perhaps no surprise that investors have been bidding up WiseTech shares over 2023 thus far.

ASX broker named WiseTech as a buy

But we’ve also seen ASX brokers give this ASX 200 tech share some love. Last month, we covered broker Morgan Stanley’s rating on the WiseTech share price. Morgan Stanley gave the company an overweight rating, as well as a 12-month share price target of $64 – almost exactly where the shares are today.

The broker continues to see WiseTech’s future as bright, so this buy rating last month could have helped investors push the WiseTech share price to the levels we are currently seeing.

So it’s likely that a combination of ASX broker love and the stellar earnings report WiseTech delivered last month are at least partly responsible for the stellar run the WiseTech share price has been on this year, and the record high prices we have seen for the company today.

No doubt investors will be very pleased with this news.

At the current WiseTech Global share price, this ASX 200 tech share has a market capitalisation of $21.12 billion, with a dividend yield of 0.2%.

The post Guess which ASX 200 tech stock has rallied 30% in 2023 and just hit an all-time high appeared first on The Motley Fool Australia.

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• These ASX shares are being dumped from the ASX 200 index this month
• Should I buy Flight Centre shares at $19?
• This ASX 200 dividend share failed to be one of the world’s biggest payers in 2022. Could it get worse?
• 5 things to watch on the ASX 200 on Monday
• 2 explosive ASX growth shares to buy this month: analysts

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended WiseTech Global. The Motley Fool Australia has positions in and has recommended WiseTech Global. 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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A number of junior ASX lithium shares have been given some very good news.

Every three months, S&P Dow Jones Indices announces its quarterly rebalance of the S&P/ASX Indices. When this occurs, shares move into and out of particularly indices.

On Friday, the index solutions company released its latest rebalance and revealed that the All Ordinaries index will be welcoming some new additions.

Among the additions are a total of five ASX lithium shares.

Which ASX lithium shares are joining the All Ordinaries index?

The five ASX lithium shares that will join the widely followed All Ordinaries index at the rebalance on 20 March are as follows:

Anson Resources Ltd (ASX: ASN)

Anson Resources is a junior mineral resources company with a portfolio of minerals projects in key demand-driven commodities. Its core asset is the Paradox Lithium Project in Utah, United States.

Atlantic Lithium Ltd (ASX: A11)

Atlantic Lithium is an African-focused lithium exploration and development company aiming to deliver Ghana’s first lithium mine. The company’s flagship project is the Ewoyaa Project, which is a significant lithium spodumene pegmatite discovery.

Latin Resources Ltd (ASX: LRS)

Latin Resources is a mineral exploration company with projects in South America and Australia. It notes that it is developing mineral projects in commodities that progress global efforts towards net zero emissions. Its flagship project is the Salinas Lithium Project in the pro-mining district of Minas Gerais, Brazil.

Lithium Power International Ltd (ASX: LPI)

Lithium Power International is a pure-play lithium explorer focused on the development of Chile’s next sustainable high-grade lithium mine. It also has two hard-rock projects in Western Australia. One of which is adjacent to Greenbushes, the world’s largest hard rock Lithium mine owned by Tianqi and Albemarle.

Red Dirt Metals Ltd (ASX: RDT)

Red Dirt Metals is a Western Australian exploration and development company aiming to bring high-quality, lithium-bearing pegmatite deposits into production. It owns 100% of the Yinnetharra Lithium Project in the Gascoyne region of Western Australia.

The post 5 ASX lithium shares being added to the All Ordinaries in the latest rebalance appeared first on The Motley Fool Australia.

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• 4 ASX mining shares that have soared over 150% in a year
• At under 30 cents each, are these ASX lithium stocks cheap?

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.

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S&P/ASX 200 Index (ASX: XJO) stocks offer investors a great opportunity to potentially build a reliable passive income stream.

If I had no savings at 50 and was looking at retiring on passive income I’d be running my slide rule over ASX 200 dividend shares. Especially fully franked shares, which can provide some handy benefits come tax time.

Here’s why.

What have ASX 200 stocks historically returned?

Over the past 10 years, ASX 200 stocks have returned an average of approximately 9% per year.

That’s the total return, mind you.

Share price gains, or capital growth, represented much of those gains.

But almost half those total returns were derived from income or yield. Which is why I’d be looking for companies with lengthy track records of reliably paying out franked dividends. And ideally, ones that have been growing their dividend payouts over time, with strong growth outlooks.

Now the future, by definition, is unknown. Meaning the returns delivered by ASX 200 stocks over the next 10 years could be higher or lower than 9%.

But sticking with history as our guide, if I were to invest $1,000 per month in blue-chip stocks, my initial $12,000 investment from this year would be worth $51,931 when I retire in 17 years. (Assuming I retire at 67 and reinvest the dividends.) That’s the magic of compound interest.

Of course, as I get closer to my retirement age, there’s less time for that interest to compound.

If I were still investing $1,000 per month at the age of 66, and ASX 200 stocks were still returning an average of 9% annually, my final year’s investment may only net me some $13,000 on the $12,000 invested.

Still, after 17 years of diligently investing in some of the top-income stocks in Australia, I would have built up a healthy passive income stream to bolster my retirement years.

Don’t forget to diversify

Investing across a range of ASX 200 stocks involved in a range of sectors is one of the best ways to reduce volatility and risk.

That’s especially important for older investors who will have less time to ride out any large, unexpected drops with a specific company or within a specific sector.

‘Don’t put all your eggs in one basket’ is an overused expression for good reason.

Happy investing!

The post No savings at 50? I’d buy ASX 200 stocks and aim to retire on a growing passive income appeared first on The Motley Fool Australia.

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• Macquarie tips 100% total return from Pilbara Minerals shares
• What can ASX 200 investors expect from the next RBA interest rate decision?
• Hoping to bank the supersized Woodside dividend? You’d better hurry
• This ASX tech share is leaping 13% today as it readies for an entrance into the ASX 200
• Strong buy: Why Goldman Sachs just added Rio Tinto shares to its conviction list

Motley Fool contributor Bernd Struben 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.

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The Pilbara Minerals Ltd (ASX: PLS) share price has started the week in a disappointing fashion.

Although the market is charging higher, it has well and truly left the lithium miner’s shares behind.

This has seen Pilbara Minerals shares fall over 2% to $4.08.

Is this a buying opportunity?

While opinion is divided on where lithium prices are heading, one leading broker that remains positive on the battery making ingredient is Macquarie.

In fact, it expects prices to remain strong enough for Pilbara Minerals to be swimming in cash in the next couple of years.

And with the company’s new dividend policy in place, the broker believes this will underpin dividends of 45 cents per share in FY 2023 and 34 cents per share in FY 2024.

Based on the current Pilbara Minerals share price, this equates to huge yields of 11% and 8.3%, respectively.

It’s no wonder then that Macquarie has the equivalent of a buy rating on its shares.

Pilbara Minerals share price tipped to climb

But the yields aren’t the only thing to get excited about.

Macquarie also has an outperform rating and lofty $7.70 price target on the lithium giant’s shares. This implies potential upside of almost 90% for the Pilbara Minerals share price over the next 12 months.

Which, combined with the broker’s dividend forecast, suggests a 100% total return from the company’s shares between now and this time next year.

It is also worth noting that Macquarie isn’t the only bullish broker. The team at Morgans has an add rating and $5.30 price target, whereas analysts at Citi have a buy rating and $4.80 price target on its shares.

Commenting on lithium prices, Citi said:

On lithium pricing, PLS says the sky is not falling in. Many options to get its uncontracted tonnes to market. PLS elected to do tolling, which was unequivocally driven by value. […] Domestic pricing is a function of the slowdown in China market but would remind everyone of the structural shift that’s underway: more EVS, more investment. Long game remains positive. PLS says customers are asking for more tonnes and enquiries for spodumene volumes continue.

The post Macquarie tips 100% total return from Pilbara Minerals shares appeared first on The Motley Fool Australia.

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• Big yields and even bigger gains lie ahead for these ASX 200 shares: analysts
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• What’s happening with ASX 200 lithium stocks this week?
• Buy these ASX 200 mining shares before they boom: experts

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.

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The S&P/ASX 200 Index (ASX: XJO) is enjoying a strong start to the week.

As we head into the lunch hour, the benchmark index is up 0.59%.

The ASX 200 will be worth watching tomorrow at 2.30pm AEDT. That’s when the Reserve Bank of Australia (RBA) announces its next interest rate decision.

As you’re likely aware, last month saw the central bank increase the official cash rate by another 0.25%, lifting it to 3.35%. That marked the ninth consecutive month of rate hikes in the RBA’s ongoing struggle to bring soaring inflation back within its target range.

The ASX 200 tumbled 0.6% in the minutes following last month’s rate hike announcement.

So, what can investors expect tomorrow?

What can ASX 200 investors expect from the RBA tomorrow?

Following February’s rate hike announcement, RBA governor Philip Lowe said:

The board expects that further increases in interest rates will be needed over the months ahead to ensure that inflation returns to target and that this period of high inflation is only temporary.

Indeed, polled economists almost unanimously say ASX 200 investors should be prepared to see the RBA follow through with yet another 0.25% interest rate boost. That would bring the official cash rate to 3.60%, up from the historic low of 0.10% last May.

“The RBA’s tightening bias is likely to remain in place until its next quarterly forecast review, in May,” Bloomberg economist James McIntyre said. “By then, we expect the data to show enough signs the economy is slowing to persuade the central bank that rates have gone high enough.”

The 0.25% increase is a number supported by 27 of the 28 economists in a recent Reuters poll.

That includes Catherine Birch, senior economist at ANZ.

“The RBA does seem more concerned about inflation. The fact demand is a key driver and not just the supply side, we think they have got more work to do to ensure inflation comes back to target,” she said.

Just how high should ASX 200 investors expect the official cash rate to go?

According to Moody’s Analytics economist Harry Murphy Cruise, likely no higher than 3.85%. But there are no guarantees.

“If global inflation resurges or domestic supply chains are disrupted by weather events, we may need to see interest rates move even higher to quell prices,” he said.

“Our baseline suggests interest rates won’t need to exceed 3.85% to bring down inflation. That said, several factors could knock Australia off this path,” Murphy Cruise added.

The post What can ASX 200 investors expect from the next RBA interest rate decision? appeared first on The Motley Fool Australia.

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• Hoping to bank the supersized Woodside dividend? You’d better hurry
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• Strong buy: Why Goldman Sachs just added Rio Tinto shares to its conviction list
• BHP share price stumbles amid super-profit tax fears
• Why is the Core Lithium share price soaring 11% today?

Motley Fool contributor Bernd Struben 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.

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It’s been a great start to the week so far for the Woodside Energy Group Ltd (ASX: WDS) share price. At the time of writing, Woodside shares are up a healthy 0.45%, bringing this ASX 200 energy share to $37.96.

It’s not often we can guarantee that an ASX share will have a bad day. But we can say with certainty that it will take a lot to get Woodsde shares to rise tomorrow though. That’s because this ASX 200 oil share is about to trade ex-dividend.

Booming profits lead to record dividends

Last month, Woodside delivered what was a very well-received earnings report, covering the six months to 31 December 2022. As we brought to you at the time, Woodside reported a 142% spike in revenue to US$16.82 billion.

Earnings before interest, tax, depreciation and amortisation (EBITDA) rose by an even more impressive 172% to US$11.23 billion, while underlying net profit after tax (NPAT) was up 223% to a record US$5.23 billion.

Investors have been rewarded handsomely for these bumper profits, with Woodside also declaring that its final dividend would come in at US$1.44 per share, fully franked, up 37% over last year’s corresponding dividend payment.

The final amount has yet to be decided in our local currency (it will be on 14 March), but at today’s exchange rates, this would equate to a dividend payment worth approximately $2.13 per share.

Barring any crazy moves in exchange rates, this will be the largest-ever final dividend Woodside has paid. It won’t quite match last year’s interim dividend though, which saw Woodside dole out a whopping $3.20 per share.

Still, this interim dividend will take Woodside’s full-year payout to around $5.33 per share.

Investors have reacted very positively to Woodside’s announcements last month. The Woodside share price is now up by almost 10% since these earnings were revealed:

Woodside’s monster dividend is inbound, but you’d better be quick

But if investors wish to see this big payment hit their bank accounts on the nominated payday of 5 April, they had better be quick. That’s because Woodside shares are going ex-dividend tomorrow. When a share trades ex-dividend, it closes off the latest dividend payment from new investors.

So anyone who owns Woodside shares as of close of market this afternoon will get this latest dividend. But anyone who buys Woodside from tomorrow’s session onwards will miss out.

Since Woodside shares will become notionally less viable tomorrow, reflecting this loss of dividend potential, expect to see a big drop in the Woodside share price to compensate for this. This is normally what happens when an ASX dividend share goes ‘ex-div’.

Investors can then look forward to banking this payment on 5 April.

At the current Woodside share price, this ASX 200 energy share now has a dividend yield of 14.03% when factoring in this upcoming dividend payment.

The post Hoping to bank the supersized Woodside dividend? You’d better hurry appeared first on The Motley Fool Australia.

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• Passive income watch: Here are the ASX 200 shares that delivered some of the biggest dividend boosts this earnings season
• 5 things to watch on the ASX 200 on Friday
• Why did the Woodside share price outperform the ASX 200 in February?
• 5 things to watch on the ASX 200 on Wednesday
• Are Woodside shares a buy following the ASX 200 energy giant’s bumper results?

Motley Fool contributor Sebastian Bowen 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.

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The Life360 Inc (ASX: 360) share price is having a very strong start to the week.

At the time of writing, the location technology company’s shares are up 13% to $5.40.

Why is this ASX tech share rocketing higher?

Investors have been fighting to get hold of this ASX tech share on Monday in response to an announcement out of S&P Dow Jones Indices.

On Friday, the index solutions company released its latest quarterly rebalance of the S&P/ASX Indices and revealed four changes to the benchmark ASX 200 index.

S&P Dow Jones Indices advised that building materials company Adbri Ltd (ASX: ABC), battery technology company Novonix Ltd (ASX: NVX), gold miner Ramelius Resources Ltd (ASX: RMS), and fleet management company Smartgroup Corporation Ltd (ASX: SIQ) will all be kicked out of the index later this month on 20 March.

Life360 added to the ASX 200 index

One of the companies that will be added to the index in their place is Life360, which has evidently gone down well with investors.

And it isn’t hard to see why. When a company is added to the ASX 200 index, it has the potential to give its shares a big boost. That’s because index funds that track the index have to buy shares in order to reflect its inclusion.

In addition, many large fund managers have strict investment mandates that prevent them from buying ASX shares that are not included in the ASX 200 index.  So, if any of these fund managers have been wanting to buy this ASX tech share but have been unable to do to their mandates, they are now able to.

And judging by the Life360 share price performance today and the large volume of trades, it appears that some could be doing just that.

The post This ASX tech share is leaping 13% today as it readies for an entrance into the ASX 200 appeared first on The Motley Fool Australia.

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More reading

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• Buy these 3 ASX growth shares this month: experts
• Why did the ASX 200 leap higher on rising unemployment data?
• Looking for growth? 3 ASX shares experts rate as buys

Motley Fool contributor James Mickleboro has positions in Life360. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Life360. 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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Rio Tinto Ltd (ASX: RIO) shares are falling on Monday morning amid broad weakness in the mining sector.

At the time of writing, the mining giant’s shares are down 1.5% to $124.64.

Should you buy Rio Tinto shares?

The team at Goldman Sachs believes that investors should be snapping up Rio Tinto shares today.

In fact, the broker is so positive on the mining behemoth that it has just added its shares to its coveted conviction list with a buy rating and improved price target of $140.40.

Based on the latest Rio Tinto share price, this implies potential upside of almost 13% for investors over the next 12 months.

In addition, the broker is forecasting a US$5.33 (A$8.19) per share fully franked dividend in FY 2023. This represents an attractive 5.8% dividend yield, which stretches the potential total return to almost 19%.

Why is Goldman bullish?

Goldman is bullish on Rio Tinto due to its production growth potential in the coming years thanks to the Guida-darri mine and the Rhodes Ridge development. It feels the latter could close the free cash flow per tonne gap with rival BHP Group Ltd (ASX: BHP).

The broker explained:

RIO (Buy add to CL): Iron ore is ~50% of our NAV and ~65% of FY23 EBITDA. In 2022, Rio’s Pilbara iron ore business assets produced 324Mt (100% basis) and Iron Ore Company of Canada (IOC) produced 10Mt.

RIO has guided Pilbara shipments at 320-335Mt which we think is conservative (GSe 335Mt) based on the ramp-up of the ~45Mtpa Guida-darri mine by mid year and the strong start to the year for shipments. Over the medium to long run, we think the development of Rhodes Ridge has the potential to be significant for RIO’s Pilbara business as it could lift mine system capacity by >10% to >360Mtpa, utilise spare rail and port infrastructure, and help close the >US$10 FCF/t gap with BHP by US$6-8/t or by >50% by the end of the decade.

All in all, the broker believes this makes the mining giant one for investors to consider buying right now.

The post Strong buy: Why Goldman Sachs just added Rio Tinto shares to its conviction list appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Monday
• Have BHP shares always paid better dividends than Rio Tinto?
• Buy Rio Tinto and this ASX dividend share: Goldman Sachs
• 5 things to watch on the ASX 200 on Friday
• Here are the top 10 ASX 200 shares today

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