How big will the Rio Tinto dividend be in 2022?

Let’s analyse and find out.

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Key points

  • Rio Tinto is one of the most generous dividend paying shares on the ASX but its payout has peaked 
  • Analysts are tipping a cut to the record $5.3 billion dividend it paid in 2021, with further cuts over the next few years 
  • But some brokers are not perturbed and they think the Rio Tinto share price is still an attractive buy 

Iron ore giant Rio Tinto Limited (ASX: RIO) is likely to cut its 2022 dividend after paying a whopping $5.3 billion payout to shareholders in the last financial year.

But the miner will remain one of the best dividend yielding shares on the S&P/ASX 200 Index (ASX: XJO), according to brokers’ forecasts.

Conditions were perfect for Rio Tinto to pay a record regular and special dividend of US$10.40 ($14.23) a share in FY2021. This is thanks to high iron ore prices and relatively low capex requirements.

Rio Tinto’s 2022 dividend cut

Many of the tailwinds remain and cash is still spilling out of its coffers – although at a slower pace. This means Rio Tinto’s dividends have probably peaked – at least for the next few years.

The analysts at Macquarie Group Ltd (ASX: MQG) are forecasting a dividend payment of US$9.38 for the financial year.

While that represents a close to 10% cut to the FY2021 dividend, the 20% tumble by the Rio Tinto share price means its shares are sitting on a dividend yield of around 13% for financial year 2022 (on today’s exchange rate).

Throw in franking credits and this lifts its gross yield to 19%.

Will Rio Tinto appeal to income investors?

But ASX mining shares don’t typically make good income shares as their dividends can be volatile.

This is certainly the case for Rio Tinto. The expected easing in the iron ore price from its current elevated levels will see its dividend continue to fall.

Macquarie is forecasting Rio Tinto’s dividend to come in at US$6.52 per share in FY2023 and US$5.58 in the following year.

Varying dividend forecasts

However, Credit Suisse is more cautious in its assumptions. The broker is tipping the 2022 Rio Tinto dividend of US$7.72 a share. This puts the miner’s dividend yield at 10.7% if franking credits are included.

Credit Suisse’s lower dividend estimate is based on its more sombre outlook for Rio Tinto’s earnings. The broker is forecasting adjusted earnings per share (EPS) of US$9.58 when consensus is standing at US$12.08.

Is Rio Tinto a good dividend share to buy in 2022?

Nonetheless, the Rio Tinto share price still represents good value, according to Credit Suisse. It is recommending the shares as outperform with a 12-month price target of $138 a share.

Macquarie is also upbeat about the miner. It too rates the Rio Tinto share price as outperform with a 12-month price target of $140 a pop.

Should you invest $1,000 in Rio Tinto right now?

Before you consider Rio Tinto , you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Rio Tinto wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

Motley Fool contributor Brendon Lau has positions in Macquarie Group Limited and Rio Tinto Ltd. 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 recommended Macquarie Group Limited. 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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