Owning Rio Tinto Ltd (ASX: RIO) shares normally comes with a decent dividend each year. The business has a commitment to reward shareholders.
ASX mining shares like Rio Tinto can provide investors with a large dividend yield under the right circumstances because they typically have a relatively low price-earnings (P/E) ratio. The lower the earnings multiple, the higher the dividend yield.
Rio Tinto's board expects total cash returns to shareholders over the longer-term to be in a range of between "40% to 60% of underlying earnings in aggregate through the cycle." Mining is a cyclical nature, so in times of strong earnings and cash generation, the board intends to supplement the ordinary dividend with "additional returns".
However, with the iron ore price currently sitting at around US$107 per tonne, the commodity price has fallen significantly from around US$140 per tonne at the start of 2024.
So, let's look at what the projected dividends are for owners of Rio Tinto shares.
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First, FY25
The broker UBS recently noted (after seeing the FY24 result) that Rio Tinto is expecting iron ore unit costs to increase 3% year over year to between US$23 and US$24.5 per tonne, compared to US$23 per tonne in 2024. But, the unit costs are still expected to reduce to around US$20 per tonne in the medium-term.
The business said the total loss of iron ore supply from four cyclones is currently estimated at around 13mt, of which it has mitigation plans in place for "around half over the course of the year". But, Rio Tinto has "limited ability to mitigate further losses if incurred", according to UBS.
A full assessment of the cost of disruption will be undertaken at the end of the first quarter of 2025.
UBS noted the other four replacement mines are "progressing broadly to plan".
With the huge Simandou project in Africa, Rio Tinto is expecting first production at mine gate at the end of 2025, with the ramp-up to capacity over 30 months.
On the US tariffs, UBS said it's too early to assess the financial impact on the Canadian businesses and overall Rio Tinto business.
UBS commented on Rio Tinto's copper Oyu Tolgoi and Resolution projects. The broker noted the ramp-up of production continues to progress, with copper volumes expected to rise by more than 50% in 2025, and average 500kt of annual production between 2028 and 2036.
Now, let's look at how the dividend payments could perform.
For the 2025 financial year, Rio Tinto is expected to pay an annual dividend per share of US$4.71. The business paid a dividend per share of US$4.02 in FY24.
Next, FY26
With Rio Tinto's dividend being decided by a dividend payout ratio of its profit generation – rather than based on a dollar amount – a projected increase of profit in FY26 could help fund a larger payout for the ASX mining share.
UBS predicts the Rio Tinto board could declare an annual dividend per share of US$4.81.
After that, FY27
The annual Rio Tinto dividend could then see a reduction in the 2027 financial year.
UBS is projecting that the ASX mining share's annual dividend per share could reduce to US$4.61.
Finally, FY28
The business could end this series of projections with a bang. Rio Tinto's biggest annual dividend in the second half of the decade could come in the 2028 financial year.
UBS currently predicts that the Rio Tinto annual dividend per share could be US$5.27 in FY28.
