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Is China about to blow up the dividends of BHP, Rio and Fortescue?

Is China about to blow up the dividends of BHP Group Ltd (ASX: BHP), Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG)?

What has happened with China?

According to reporting by the Australian Financial Review, China is changing the supervising rules for inspecting iron ore.

The worry is that China could cause major disruptions to Australia’s iron ore exports. It could mean Australian iron ore gets checked but Brazilian imports don’t have the same checks.

But BHP isn’t worried about it and actually thinks it could lead to a quicker process. Fortescue also confirmed it was part of a process that has been in the works for years.

Plenty of people are linking Australia’s support for a coronavirus inquiry to a potential backlash by China. We have already seen the Asian superpower put tariffs onto Australian barley.

If China were to put tariffs onto Australian ore, or stop buying altogether, then it could be devastating for the dividend and profit of BHP, Rio Tinto and Fortescue. Indeed, state and federal governments would feel the effects of it too. Let’s hope China doesn’t do anything else. 

What have the miner share prices done?

At the time of writing, the BHP share price is slowly down (after being up in the morning), the Rio Tinto share price is down 0.3% and the Fortescue share price is down 2.3%.

It’s this type of event that could cause the mining environment to dramatically shift. The outlook for miner dividends is (was?) good, but things can change quite rapidly if demand for iron or the price of iron goes down.

I wouldn’t own a miner for dividends, just for the theoretical expected profit generation (and valuation of those cashflows). I’m not interested in owning miner shares and this news puts me off even more.

I’d much rather buy shares that can consistently grow profit year after year.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.