The Rio Tinto Limited (ASX: RIO) share price is reaching new highs. But it may also be a large dividend opportunity over the next 12 months.
Rio Tinto is one of the largest iron ore miners in the country. According to the ASX, it has a market capitalisation of over $48 billion.
It wasn’t long ago that the huge resources business released its second quarter production result.
Quarterly production numbers
The miner revealed that in the second quarter of 2021, its Pilbara iron ore production was down 9% against the prior corresponding period (pcp) to 75.9 Mt. Compared to the first quarter of 2021, production was down 1%.
The company explained that the reduction compared to last year was due to above average rainfall in the West Pilbara, shutdowns to enable replacement mines to be tied in, processing plant availability, and “cultural heritage management”. Ongoing COVID-19 restrictions and a tight labour market have further impacted the miner’s ability to access experienced contractors and particular skill sets.
It’s expecting iron ore shipments to be at the low end of its guidance range for the 2021 year (325 Mt to 340 Mt), which remains subject to COVID-19 disruptions, tie-in and ramp up of brownfield replacement mines and management of cultural heritage.
Looking at the other production numbers that Rio Tinto released, against the pcp, bauxite was down 6% to 13.7 Mt, aluminium was up 4% to 816 kt, mined copper was down 13% to 115.5 kt, titanium dioxide slag was up 14% to 298 kt, IOC (Iron Ore Company of Canada) iron ore pellets and concentrate was down 2% to 2.7 Mt.
The Rio Tinto CEO Jakob Stausholm provided some commentary about its quarter:
The global economy, in-particular China, recovered strongly and we are intensely focused on servicing our customers with as much product as we can…Heightened COVID-19 constraints, which resulted in numerous travel restrictions, added further pressure on the business and limited our ability to access additional people, particularly in Western Australia and Mongolia, in order to deliver operational improvements or maintenance initiatives and accelerate projects.
Is the Rio Tinto share price a dividend opportunity?
Different brokers have different thoughts about Rio Tinto.
For example, Credit Suisse has a price target of $133 on the business, so it’s not expecting the share price to do much over the next 12 months. The dividend is a positive according to the broker. It’s expecting a dividend of $15.18 per share in FY21 and an annual dividend of $10.10 in FY22, translating to a fully franked dividend yields of 11.4% and 7.6%.
But UBS is very different with its price target – it rates Rio Tinto as a sell with a price target of $104. However, the broker is expecting the iron ore price is going to fall into 2022 and further beyond that. It has guided for a FY21 dividend of $21.38 and a FY22 dividend of $12.73 – which is more than Credit Suisse is forecasting. UBS is expecting the fully franked yields for FY21 and FY22 to be 16% and 9.6%.