Are you looking for a reason to buy Rio Tinto Ltd (ASX: RIO) shares?
If you are, then I have good news for you. I don't have one reason, I have five reasons the mining giant could be a buy now courtesy of the team at Goldman Sachs.
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Why are Rio Tinto shares a buy?
According to a recent note out of the investment bank, its analysts have a conviction buy rating and $136.20 price target on the miner's shares.
Based on the current Rio Tinto share price of $109.30, this implies potential upside of 24% over the next 12 months.
But the returns don't stop there. Rio Tinto is one of the more generous dividend payers on the Australian share market and Goldman expects this to remain the case in the near term.
Its analysts are forecasting fully franked dividend yields of approximately 7.5% and 6.5%, respectively, for this year and next.
This stretches the total 12-month potential return to beyond 30%.
Five reasons
So, what are the five reasons to buy Rio Tinto shares?
Goldman revealed that these include its attractive valuation, strong free cash flow, and production growth outlook. The broker explains:
We are Buy rated (on CL) on RIO due to: (1) compelling relative valuation vs. peers, (2) Strong FCF and dividend yield with our bullish view on iron ore, aluminium and copper prices, (3) Strong production growth in 2023 & 2024, (4) Pilbara turnaround (~50% of group NAV), (5) Compelling high margin low emission aluminium exposure.
All in all, Goldman Sachs appears to believe that this could make Rio Tinto a top option for anyone looking for exposure to the mining sector right now.
