Rio Tinto Ltd (ASX: RIO) shares are a popular option for Australian income investors.
And it really is not hard to see why.
Over the last decade, the mining giant has rewarded its shareholders with billions of dollars of fully franked dividends.
For example, in FY 2023, Rio Tinto reported underlying earnings of US$11.8 billion, which allowed its board to declare total dividends of US$4.35 per share. This equates to a total payout of US$7.1 billion (approximately A$11 billion).
To put that into context, that is more than the market capitalisations of Qantas Airways Limited (ASX: QAN) and Medibank Private Ltd (ASX: MPL). It is also just a touch short of the A$12 billion valuation of lithium giant Pilbara Minerals Ltd (ASX: PLS).
But those dividends have been and gone. What's next for the Rio Tinto dividend? Let's now take a look at what Goldman Sachs is forecasting following the release of the miner's quarterly update last week.
Rio Tinto dividend forecast
According to the note, the broker is expecting the Rio Tinto dividend to be relatively flat in FY 2024 at $4.30 (A$6.69) per share. Based on the latest Rio Tinto share price of $129.96, this will mean a fully franked dividend yield of 5.15%.
Looking ahead, its analysts expect a small increase to US$4.50 (A$7.00) per share in FY 2025. If this proves accurate, it will mean a fully franked 5.4% dividend yield for investors.
In FY 2026, the broker is expecting the Rio Tinto dividend to remain at US$4.50 (A$7.00) per share. This will mean another fully franked 5.4% dividend yield.
Goldman then expects the miner's dividend to return to growth in FY 2027. For this financial year, the broker is forecasting a US$4.60 (A$7.15) per share dividend. This equates to a fully franked 5.5% dividend yield for investors.
Finally, in FY 2027, another modest dividend increase is expected by the broker. It has pencilled in a fully franked dividend of US$4.70 (A$7.31) per share. If this is accurate, it will mean a yield of 5.6%.
All in all, that's dividend yields of approximately 5.15% to 5.6% through to FY 2027.
This is expected to be underpinned by production growth and favourable copper and aluminium prices. Goldman explains:
Attractive FCF and dividend yield + GS bullish copper and aluminium (~30% of EBITDA increasing to 45-50% by 2026): FCF/dividend yield in 2024E (c. 7%/5% yield) & 2025E (c. 8%/5% yield) driven by our bullish view on aluminium and copper in 2H24 (~30% of group EBITDA in 2024 increasing to 45-50% by 2026) and constructive view on iron ore.
