How does the Rio Tinto (ASX:RIO) dividend compare to the materials sector?

The Rio Tinto Limited (ASX: RIO) share price certainly has been a strong performer over the last 12 months. Since …

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Rio Tinto Limited (ASX: RIO) share price certainly has been a strong performer over the last 12 months.

Since this time in 2020, the mining giant's shares have risen an impressive 26%.

Despite this, Rio Tinto shares are still expected to provide investors with double digit dividend yields in the near term. This makes it one of the more generous dividend payers in the materials sector.

A woman holds a lightbulb in one hand and a wad of cash in the other

Image source: Getty Images

What dividends are expected from Rio Tinto in the near term?

According to a recent note out of Goldman Sachs, its analysts are forecasting some big fully franked dividends in the near term.

Goldman is expecting dividends per share of US$13.40 in FY 2021, US$12.50 in FY 2022, and then US$10.90 in FY 2023.

Based on current exchange rates and the latest Rio Tinto share price of $128.26, this will mean yields of 14.2%, 13.3%, and 11.6%, respectively.

In addition, Goldman Sachs has a buy rating and $147.50 price target on Rio Tinto's shares. This represents potential upside of 15% over the next 12 months before dividends.

How does the Rio Tinto dividend compare to its peers?

The Rio Tinto dividend compares reasonably favourably to what's on offer from its peers.

For example, Goldman Sachs is forecasting BHP Group Ltd (ASX: BHP) to pay fully franked dividends per share of US$2.89 in FY 2021, US$4.46 in FY 2022, and US$4.00 in FY 2023.

Based on the current BHP share price of $52.04, this implies yields of 7.5%, 11.6%, and then 10.5%, respectively, over the three-year period.

Goldman Sachs also has a buy rating on BHP shares. Its price target currently stands at $57.70, representing potential upside of almost 11%.

What about others?

Finally, another popular option in the sector for dividends is Fortescue Metals Group Limited (ASX: FMG).

Goldman is forecasting dividends per share of US$2.70 in FY 2021, US$2.64 in FY 2022, and then US$1.48 in FY 2023. This will mean yields of 16.2%, 15.9%, and 8.9%, respectively.

However, Goldman isn't anywhere near as positive on Fortescue's shares and actually has a sell rating and $19.90 price target on them.

Based on this, the Rio Tinto dividend is arguably the best option out of the three. Particularly when you factor in the potential share price gains as well.

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 Bruce Jackson.

More on Dividend Investing

Australian dollar notes in the pocket of a man's jeans, symbolising dividends.
Dividend Investing

These buy-rated ASX dividend stocks are forecast to pay 6%+ yields in 2027

Analysts have buy ratings on these high-yield stocks. Let's see what they offer.

Read more »

a man sits back from his laptop computer with both hands behind his head feeling happy to see the Brambles share price moving significantly higher today
Dividend Investing

3 ASX dividend shares to double up on right now

Analysts have buy ratings on these top income stocks.

Read more »

Man holding out $50 and $100 notes in his hands, symbolising ex dividend.
Dividend Investing

Passive income investors: This ASX stock has an 8% yield and monthly payouts

The shares climbed higher on Tuesday.

Read more »

Happy woman working on a laptop.
Dividend Investing

A top ASX dividend stock to buy on a pullback

With a strong track record and steady dividends, this stock would be very attractive at cheaper prices.

Read more »

A mother helping her son use a laptop at the family dining table.
Dividend Investing

3 of the safest ASX 200 dividend stocks in Australia

For investors seeking dependable dividends, these ASX 200 shares could provide a strong foundation for long-term income.

Read more »

A couple working on a laptop laugh as they discuss their ASX share portfolio.
Dividend Investing

A dependable ASX dividend stock to buy with $20,000 right now

This ASX blue-chip may not be flashy, but its steady earnings and dividends could make it a dependable income pick.

Read more »

Australian notes and coins symbolising dividends.
Dividend Investing

3 ASX dividend shares yielding 5%+ that still have growth potential

These shares are a great option for passive income seeking investors.

Read more »

A bearded man holds both arms up diagonally and points with his index fingers to the sky with a thrilled look on his face.
Dividend Investing

1 super cheap ASX dividend stock down 16% to buy and hold for decades

The stock was caught up in a sector-wide selloff earlier this month.

Read more »