Rio Tinto: An Iron Titan With A 6.85% Dividend Yield

Seeking AlphaDividend Ideas | Basic Materials | United KingdomRio Tinto: An Iron Titan With A 6.85% Dividend YieldJul. 1, 2020 3:03 PM ET|| About: Rio Tinto Group (RIO), Includes: BHP, VALEby: Juan Ignacio OrlandoJuan Ignacio Orlando Long/short equity, value, special situations, contrarianSummaryI consider Rio Tinto a good choice for value investors.
The stock is reasonably priced relative to both its own history and its peers.
Its dividend can be considered fairly safe and a good source of cash for income-oriented investors.
Supply constraints in Brazil and increased demand from Chinese steelmakers are tailwinds, at least in the short run.
Thesis
In my opinion, Rio Tinto (NYSE: RIO) is a good choice for value investors for these reasons:
It is a very profitable company that generates a healthy stream of cash flows. Also, it has world-class assets and low debt. RIO pays a dividend yield of 6.85% that can be considered reasonably safe. The stock is fairly priced both historically and relative to its most direct competitor, BHP Group (NYSE: BHP). Iron prices are expected to remain high for the next months.
Source

An introduction to the company

Rio Tinto Group engages in finding, mining, and processing mineral resources worldwide. The company has been in business since 1873, and it serves clients mainly in south-east Asia and North America. The company has significant exposure to iron ore since 76% of its underlying EBITDA comes from this commodity.

Source: Rio Tinto Fact Book
Rio Tinto is a great value investment
When screening for value stocks, investors typically look for large-cap or mid-cap companies that have been in business for a long time and are leaders in their industries. Furthermore, these businesses should have world-class assets, and these assets should be generating large amounts of cash. Also, the company should be robust in terms of solvency and liquidity. Finally, a competent management team and a... Read more