I wrote a week ago that I thought ASX iron ore shares were a buy. Since then, the Rio Tinto Ltd (ASX: RIO) share price is up more than 3%, the Fortescue Ltd (ASX: FMG) share price is up 9%, and the BHP Group Ltd (ASX: BHP) share price is up more than 4%. While I'm still positive on Rio Tinto shares, there are other ASX dividend giants I'm more optimistic about.
Rio Tinto shares could be a cyclical opportunity because the iron ore price is currently below US$100 per tonne.
The mining company typically has a pleasing dividend yield because of its relatively low price-earnings (P/E) ratio and generous dividend payout ratio.
But, I'm going to tell you why the ASX dividend giant Sonic Healthcare Ltd (ASX: SHL) makes more sense to me.
Demand
I like that Rio Tinto is diversifying away from iron ore with a growing focus on copper. But iron ore still remains the most important commodity for the ASX mining share, in my opinion.
However, the demand for iron ore is reliant mainly on China buying significant volumes of the commodity. Demand can fall significantly in weak years, which can affect Rio Tinto's revenue, profit, and, ultimately, dividend.
As a global pathology business, demand for Sonic Healthcare's services can be consistent and resilient. People can get sick during all times of the economic and commodity cycles, and government funding in many of Sonic Healthcare's markets helps ensure cost isn't a barrier to usage.
Over the long term, the ASX dividend giant could see ongoing demand from growing and ageing populations in its operating markets.
In the FY24 result, the business saw base business revenue growth of 16%, with organic growth of 6%.
Geographic diversification
Rio Tinto shares and the dividend rely on China for most of its revenue.
Meanwhile, Sonic Healthcare earns its revenue from a variety of Western countries.
In FY24, the breakdown of pathology revenue was as follows: USA ($2.15 billion), Australia ($1.96 billion), Germany ($1.8 billion), Switzerland ($889 million), the UK ($670 million), Belgium ($147 million), and New Zealand ($32 million).
I like that Sonic Healthcare has a much more diverse revenue base and the flexibility to expand into new countries or grow in existing markets.
Impressive dividend history
The Rio Tinto annual dividend has not demonstrated much reliability. The ASX mining share cut its payout by 12% in FY23.
Meanwhile, Sonic Healthcare stuck with its progressive dividend policy in the FY24 result, despite some analysts expecting the ASX dividend giant might cut its dividend payout because of the challenged profit.
Sonic Healthcare grew its interim dividend per share, final dividend and full-year dividend by 2%. Over the past 30 years, it has grown its dividend almost every year, with only a small number of years where the dividend was maintained.
Its current dividend yield is 3.30%, which I think is a solid starting point.
