Rio Tinto Ltd (ASX: RIO) shares could be an excellent pick for long-term passive income, as the business often has a generous dividend yield.
The business is involved with a number of commodities including copper, iron ore, bauxite, lithium, aluminium and more.
I like the diversified portfolio of resources because that means it's not reliant on any particular commodity to make profit and it can ride different supply and demand cycles, hopefully smoothing out earnings.
With a generous dividend payout ratio and relatively low price/earnings (P/E) ratio, I reckon Rio Tinto is one to look into further for income-focused investors.
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FY26
We're still in Rio Tinto's 2026 financial year because, unlike many other Australian companies, it follows the calendar year rather than ending in June.
The latest update we've heard from the ASX mining share was its FY26 third-quarter update.
In that latest quarter, on a year-over-year basis, copper production was flat at 205kt, global iron ore production was up 2% to 89.7mt, bauxite production was down 4% to 15.7mt, aluminium production was down 2% to 0.8mt and lithium carbonate production was up 4% to 13kt.
Management was pleased with the quarter, calling it a strong operational performance for the three months. It also noted that it's on track for a $1.8 billion annualised productivity benefit run-rate by the end of 2026 – it'll feel the full effects of this during FY27.
Rio Tinto also said that its major projects remain on schedule and budget, supporting its growth profile to 2030.
The FY26 half-year result was particularly impressive, with revenue growth of 15%, underlying operating profit (EBITDA) growth of 28%, underlying earnings growth of 43% and free cash flow increasing 75%. All of that growth allowed the business to hike its half-year dividend by 43%.
According to the projection on CMC Invest, Australian owners of Rio Tinto shares are expected to see an annual dividend per share of $6.676. That translates into a dividend yield of 4.4% excluding franking credits and 6.3% including franking credits.
FY27
The ASX mining share's performance in the 2027 financial year could depend on how commodity prices perform, as well as the production ramp-up at Oyu Tolgoi (Mongolian copper) and Simandou (African iron ore).
Currently, analysts estimate that the miner's earnings could climb a little in FY27 and this could fund a 2% increase in the annual dividend per Rio Tinto share to $6.809.
FY28
Analysts currently estimate that Rio Tinto could deliver a similar result for the 2028 financial year, according to CMC Invest, though slightly down.
The projection suggests Rio Tinto could pay an annual dividend per share of $6.632 in FY28. That would translate into a dividend yield of 4.4% excluding franking credits and 6.3% including franking credits.
Analysts now seem to suggest that the Rio Tinto share price is undervalued. Based on the views of 10 brokers, the average price target for the ASX-listed mining share is $172.44. This suggests a possible rise of more than 14% over the next year (at the time of writing), according to CMC Invest.
