Rio Tinto dividend

[Itsallaguess]

Ah - the classic -

'Even if the yield halved, it would still be a good yield'...

There's good reasons as to why it's a classic...

The problem is, of course, that life is never that simple, or that risk-free....

I hold neither Rio nor BHP and so it does not matter to me what happens to the dividend (or the share price).

It may be the classic comment but what do you think will happen if the dividend is substantially cut?

There was a substantial cut in the RIO dividend around the 2008/2009 period, and if you look at the RIO price chart around that time, then that should hopefully clearly highlight the additional 'excitement' that often accompanies a large dividend cut from very high yielding shares...

I'm sure those that mention the relevant 'due diligence' that they're using to satisfy themselves of the absence of such risk at this current time with regards to RIO are happy that such exciting price action can't occur again, although I think it's always telling that we never actually get to see any actual details of such 'due diligence', so that others can perhaps benefit and share that particular relief...

Cheers,

Itsallaguess

[idpickering]

Ah - the classic -

'Even if the yield halved, it would still be a good yield'...

There's good reasons as to why it's a classic...

The problem is, of course, that life is never that simple, or that risk-free....

I hold neither Rio nor BHP and so it does not matter to me what happens to the dividend (or the share price).

It may be the classic comment but what do you think will happen if the dividend is substantially cut?

There was a substantial cut in the RIO dividend around the 2008/2009 period, and if you look at the RIO price chart around that time, then that should hopefully clearly highlight the additional 'excitement' that often accompanies a large dividend cut from very high yielding shares...

I'm sure those that mention the relevant 'due diligence' that they're using to satisfy themselves of the absence of such risk at this current time with regards to RIO are happy that such exciting price action can't occur again, although I think it's always telling that we never actually get to see any actual details of such 'due diligence', so that others can perhaps benefit and share that particular relief...

Cheers,

Itsallaguess

I don’t appreciate your constant seemingly sneering and snide comments. I’ve reported your post to alert our mods to this. It’s becoming not a very nice to be here.

Ian.

Moderator Message:
Please don't report this post. We are aware of it; it has been dealt with. --MDW1954

[Itsallaguess]

I don’t appreciate your constant seemingly sneering and snide comments. I’ve reported your post to alert our mods to this.

Instead of constantly putting your 'offended' face on Ian, I'd appreciate it if you challenged what's been said, and not how it's said...

The lack of ability to challenge absolutely *anything* that you say without you constantly being 'offended' is one of the single worst aspects of this HYP Practical board, and the primary reason for the lack of any reasonable engagement over the years, and this is yet another example of such behaviour.

If I wish to highlight the dangers of ultra-high yields to income-investors, having plenty of scars to show that such dangers do exist, then I will continue to do so, and if I want to ask where this 'due dilligence' is that others might have carried out that might suggest such ultra-high yields are OK to invest in, then I think that's fair as well...

Itsallaguess

[scrumpyjack]

In mining shares I have stuck with just Rio and BHP, one reason being that they both have very very low cost of production. So when all is doom and gloom they still make profits but when the sun shines they make gigantic profits. They don't swing between profit and loss. They have previously made stupid acquisitions at the wrong point in the cycle but for the time being management still remembers that lesson and so pays out the super profit as dividend rather than splurging it on acquisitions.

[Dod101]

Ah - the classic -

'Even if the yield halved, it would still be a good yield'...

There's good reasons as to why it's a classic...

The problem is, of course, that life is never that simple, or that risk-free....

I hold neither Rio nor BHP and so it does not matter to me what happens to the dividend (or the share price).

It may be the classic comment but what do you think will happen if the dividend is substantially cut?

There was a substantial cut in the RIO dividend around the 2008/2009 period, and if you look at the RIO price chart around that time, then that should hopefully clearly highlight the additional 'excitement' that often accompanies a large dividend cut from very high yielding shares...

I'm sure those that mention the relevant 'due diligence' that they're using to satisfy themselves of the absence of such risk at this current time with regards to RIO are happy that such exciting price action can't occur again, although I think it's always telling that we never actually get to see any actual details of such 'due diligence', so that others can perhaps benefit and share that particular relief...

Cheers,

Itsallaguess

Yes I remember writing about the likelihood (of a cut) in either or both Rio Tinto and BHP. Anyway the simple fact is that I will not be buying either in the near future but given the very high yield currently showing for RIO a cut is surely on the cards, that I can agree with you on.

Dod

[scrumpyjack]

Yes I won't buy more just now - I topped up my BHP holding last November at 1979p, since when they have paid a 112p divi, nor will I sell them.

The time to buy is at the bottom of the cycle - if you can judge when that is!

It really does not worry me that the dividend goes up and down. If you look at high yielders, I would have thought the market is saying Persimmon's divi is unsustainable at 12.5%! Not worried about that either!

[IanTHughes]

Dividend history for Rio Tinto PLC (RIO) – 2003 to 2022 (Forecast)

Annual change during various time periods:

Year End  | Dividend  | 1 Year  | 3 Years | 5 Years | 10 Years
31-Dec-22 | 577.5600  | -23.65% |   6.49% |  22.13% |   18.39%
31-Dec-21 | 756.4200  |  85.23% |  27.06% |  41.29% |   23.66%
31-Dec-20 | 408.3647  | -14.62% |  24.31% |  23.33% |   19.75%
31-Dec-19 | 478.2634  |  29.70% |  52.69% |  28.81% |   32.42%
31-Dec-18 | 368.7447  |  73.48% |  37.09% |  25.15% |   16.22%
31-Dec-17 | 212.5630  |  58.20% |  16.37% |  14.76% |   11.91%
31-Dec-16 | 134.3622  |  -6.12% |   3.81% |   8.23% |    9.54%
31-Dec-15 | 143.1287  |   6.12% |  10.26% |  16.27% |   12.27%
31-Dec-14 | 134.8807  |  12.31% |  14.24% |  36.14% |   12.38%
31-Dec-13 | 120.1021  |  12.49% |  21.27% |   7.93% |   12.50%
31-Dec-12 | 106.7707  |  18.02% |  54.70% |   9.12% |         
31-Dec-11 |  90.4691  |  34.33% |   3.33% |  10.87% |         
31-Dec-10 |  67.3498  | 133.52% |  -0.80% |   8.40% |         
31-Dec-09 |  28.8406  | -64.83% | -18.87% |  -7.24% |         
31-Dec-08 |  82.0000  |  18.84% |  22.14% |  17.25% |         
31-Dec-07 |  69.0000  |  27.78% |  18.00% |         |         
31-Dec-06 |  54.0000  |  20.00% |  13.43% |         |         
31-Dec-05 |  45.0000  |   7.14% |         |         |         
31-Dec-04 |  42.0000  |  13.51% |         |         |         
31-Dec-03 |  37.0000  |         |         |         |         

I would suggest that historically at least, looking at the progress over the past 3/5/10 years, RIO is a pretty good income investment. HYP is of course an income strategy, so I would be somewhat surprised if an HYPer would dismiss RIO, simply because the yield appears “too high to be true”.

Currently, excluding "Specials", I calculate the historical yield to be 11.77%. Even if the dividend is halved, a purchase made today would still lock in a yield of 5.89%, whatever “excitement” might be experienced with the share price.


Ian

[idpickering]

I would suggest that historically at least, looking at the progress over the past 3/5/10 years, RIO is a pretty good income investment. HYP is of course an income strategy, so I would be somewhat surprised if an HYPer would dismiss RIO, simply because the yield appears “too high to be true”.

Ian

Thanks for your input Ian.

The bottom line though, imho, is, each to their own.

Ian.

[MDW1954]

I was interested in MDW's reaction to the summary of the article by John Kingham. The article was not telling us much we might not already know but all the same I would be interested to know what put MDW off.

Dod

Because I thought that many more factors impact on RIO's dividend than just inflation. Chinese demand, for instance.

MDW1954

[MDW1954]

I don’t appreciate your constant seemingly sneering and snide comments. I’ve reported your post to alert our mods to this.

Instead of constantly putting your 'offended' face on Ian, I'd appreciate it if you challenged what's been said, and not how it's said...

The lack of ability to challenge absolutely *anything* that you say without you constantly being 'offended' is one of the single worst aspects of this HYP Practical board, and the primary reason for the lack of any reasonable engagement over the years, and this is yet another example of such behaviour.

If I wish to highlight the dangers of ultra-high yields to income-investors, having plenty of scars to show that such dangers do exist, then I will continue to do so, and if I want to ask where this 'due dilligence' is that others might have carried out that might suggest such ultra-high yields are OK to invest in, then I think that's fair as well...

Itsallaguess

Moderator Message:
A quick reminder of two site rules...

* To make this a valued and successful discussion forum, LemonFool asks all users to be respectful, understanding and helpful to other posters.
* Robust debate is allowed, but it must remain polite and respectful at all times. Stick to the facts and argue the points discussed, rather than criticise the poster.

--MDW1954

[Dod101]

I was interested in MDW's reaction to the summary of the article by John Kingham. The article was not telling us much we might not already know but all the same I would be interested to know what put MDW off.

Dod

Because I thought that many more factors impact on RIO's dividend than just inflation. Chinese demand, for instance.

MDW1954

It is a pity then that you did not read the full article because the author spends quite a lot of time discussing the rise in Chinese demand and then the decline in its rate of growth from over 10% to a more sedate 5%. He then goes on to discuss the effect of the green revolution and how that might affect the demand for iron ore. I suggest that you may find it useful to read the full article before commenting on it.

Dod

[MDW1954]

It is a pity then that you did not read the full article because the author spends quite a lot of time discussing the rise in Chinese demand and then the decline in its rate of growth from over 10% to a more sedate 5%. He then goes on to discuss the effect of the green revolution and how that might affect the demand for iron ore. I suggest that you may find it useful to read the full article before commenting on it.

Dod

Fair enough. That wasn't clear from the excerpt.

MDW1954

[funduffer]

It is a pity then that you did not read the full article because the author spends quite a lot of time discussing the rise in Chinese demand and then the decline in its rate of growth from over 10% to a more sedate 5%. He then goes on to discuss the effect of the green revolution and how that might affect the demand for iron ore. I suggest that you may find it useful to read the full article before commenting on it.

Dod

Fair enough. That wasn't clear from the excerpt.

MDW1954

Yes, sorry I didn’t give a better overview of the article in the original posting. It was very long and detailed so I just quoted the dividend forecast he came up with. This being the HYP board and all that!

The main takeaway for me was that RIO is mainly iron ore, and iron ore prices tend to track world GDP/Population growth. Now China is moving out of it high growth industrialisation phase, then demand will fall / rise more slowly. Maybe a world recession will reduce demand even more and we will see the bottom of the cycle quite soon. Who knows?

Anyway, I am happy to hold, but I won’t be buying at the moment as I think we are just past the peak of the commodity cycle. I think I agree the current dividend level, ignoring the specials, is unlikely to be maintained much longer.

FD

[MDW1954]

It is a pity then that you did not read the full article because the author spends quite a lot of time discussing the rise in Chinese demand and then the decline in its rate of growth from over 10% to a more sedate 5%. He then goes on to discuss the effect of the green revolution and how that might affect the demand for iron ore. I suggest that you may find it useful to read the full article before commenting on it.

Dod

Fair enough. That wasn't clear from the excerpt.

MDW1954

Yes, sorry I didn’t give a better overview of the article in the original posting. It was very long and detailed so I just quoted the dividend forecast he came up with. This being the HYP board and all that!

The main takeaway for me was that RIO is mainly iron ore, and iron ore prices tend to track world GDP/Population growth. Now China is moving out of it high growth industrialisation phase, then demand will fall / rise more slowly. Maybe a world recession will reduce demand even more and we will see the bottom of the cycle quite soon. Who knows?

Anyway, I am happy to hold, but I won’t be buying at the moment as I think we are just past the peak of the commodity cycle. I think I agree the current dividend level, ignoring the specials, is unlikely to be maintained much longer.

FD

Yes, your brief excerpt caused me to incur Dod's ire, you bad boy! No worries. I'm glad John Kingham's actual article was much better; I do have a lot of time for him. Your second paragraph has him giving a much more sensible take on things.

And irrespective of Pyad's post (sadly much-recc'd), I don't regret pointing out to IDP that this is not anywhere near the bottom of the cycle.

MDW1954

[moorfield]

If I wish to highlight the dangers of ultra-high yields to income-investors, having plenty of scars to show that such dangers do exist, then I will continue to do so, and if I want to ask where this 'due dilligence' is that others might have carried out that might suggest such ultra-high yields are OK to invest in, then I think that's fair as well...

Yup, well said in a fair post IAAG. I have those scars too, so understand perfectly why you might want to ask that.

I have suggested here in the past that one way to avoid the ultra highest yields (when selecting a new HYP) might be to work upwards from the lowest yield, rather than downwards from the highest yield. Another way might be to simply rule out anything above a certain level, I use 2*CTY as a coarse "ceiling", which has helped me to avoid buying VOD, IMB, RDSB at the "wrong time" in recent years.

Why is RIO's yield so high relative to others now? Because the market believes its current dividend is unsustainable in the long term, surely.

[IanTHughes]

The time to buy is at the bottom of the cycle - if you can judge when that is!

Well, for an HYPer like myself, the "time to buy" is when the yield is the highest available, with a dividend that is considered sustainable, and where the diversification requirements of the portfolio are met.

Each to their own I guess!


Ian

[Darka]

Yup, well said in a fair post IAAG. I have those scars too, so understand perfectly why you might want to ask that.

I have suggested here in the past that one way to avoid the ultra highest yields (when selecting a new HYP) might be to work upwards from the lowest yield, rather than downwards from the highest yield. Another way might be to simply rule out anything above a certain level, I use 2*CTY as a coarse "ceiling", which has helped me to avoid buying VOD, IMB, RDSB at the "wrong time" in recent years.

Why is RIO's yield so high relative to others now? Because the market believes its current dividend is unsustainable in the long term, surely.

I think this is a perfectly good strategy (2*CTY), I hold RIO and BHP with no intention of selling, but there is no way I would buy at the current yields.

Chasing yields is always a mistake, and one many of us have made.
I've retired now and don't need to take the risk, happy with doing well enough and no need to chase dangerous yields or strategies.

Most of my recent purchases have been around the CTY yield, and that's good enough for me.

[moorfield]

Most of my recent purchases have been around the CTY yield, and that's good enough for me.

...which begs the obvious question you know I like to ask, but not here...

[Darka]

Most of my recent purchases have been around the CTY yield, and that's good enough for me.

...which begs the obvious question you know I like to ask, but not here...

I can neither confirm nor deny... but I suspect you know the answer

[idpickering]

Yes, your brief excerpt caused me to incur Dod's ire, you bad boy! No worries. I'm glad John Kingham's actual article was much better; I do have a lot of time for him. Your second paragraph has him giving a much more sensible take on things.

And irrespective of Pyad's post (sadly much-recc'd), I don't regret pointing out to IDP that this is not anywhere near the bottom of the cycle.

MDW1954

And I thank you for your words of caution Malcolm. Your offering and those of some others hereabouts has caused me to reconsider my stance. I agree that the seemingly high yield on offer from a new investment, or a top up too, might just be OTT. I’m happy to just back away from chasing the RIO high yield, and look elsewhere going forward.

Ian.