Rio Tinto 2019 half year results

[idpickering]

Rio Tinto chief executive J-S Jacques said "We have delivered strong financial results with underlying EBITDA of $10.3 billion and EBITDA margin of 47%. Our financial performance was driven by our Pilbara operations with a 72% EBITDA margin, underpinned by strong iron ore prices.

"We are taking actions to protect the Pilbara Blend and optimise performance across our iron ore system, following the operational challenges which emerged in the first half.

"Our world-class portfolio and strong balance sheet serve us well in all market conditions. This, together with our disciplined capital allocation, underpins our ability to continue to invest in our business and deliver superior returns to shareholders in the short, medium and long term. Our delivery is in evidence today, with our record interim returns of $3.5 billion."

And later;

Both the 2019 interim dividend and the special dividend to be paid to our Rio Tinto Limited shareholders will be fully franked. The board expects Rio Tinto Limited to be in a position to pay fully franked dividends for the foreseeable future.

We will pay the 2019 interim dividend and the special dividend on 19 September 2019 to holders of ordinary shares and ADRs on the register at the close of business on 9 August 2019. The ex-dividend date for both the 2019 interim dividend and the special dividend for Rio Tinto Limited, Rio Tinto plc and Rio Tinto plc ADR shareholders is 8 August 2019.

https://www.investegate.co.uk/rio-tinto ... 15045190H/

[monabri]

" The ex-dividend date for both the 2019 interim dividend and the special dividend for Rio Tinto Limited, Rio Tinto plc and Rio Tinto plc ADR shareholders is 8 August 2019. Rio Tinto plc shareholders will receive 123.32 pence per share for the interim dividend and 49.82 pence per share for the special dividend"

[Bouleversee]

" The ex-dividend date for both the 2019 interim dividend and the special dividend for Rio Tinto Limited, Rio Tinto plc and Rio Tinto plc ADR shareholders is 8 August 2019. Rio Tinto plc shareholders will receive 123.32 pence per share for the interim dividend and 49.82 pence per share for the special dividend"

With that yield*, a big drop in the s.p. over the last 2 days and a lot of money earning nothing in my ISA, I was seduced into a top up at 4379.5p just before close, after which it appears to have continued to fall to 4326.5p. It will be interesting to see where it is on Monday and after it goes x-d on Aug. 8 when one might expect a further drop. I gather that only 5 out of 25 analysts rate it as a buy and the rest are saying hold, so with a bit of good luck, I won't have gone far wrong. I only added £5k so it's no big deal either way. If it continues to fall, I might even add more as I want to concentrate my holdings and get rid of the holdings which have dwindled to stupidly low amounts, e.g. Royal Mail and De la Rue. One could argue that I should be adding to them as well but I don't really see much future there. Can anyone see them recovering and is it likely that those ludicrously high dividends can be maintained? I can't forget my losses in CLLN and similar.

* or should I have said with those dividends?

[onthemove]

With that yield*,... * or should I have said with those dividends?

A few weeks ago I did the opposite. I reduced my holding by around 50%.

The main reason (as well as being rather a disproportionately large holding after all the capital gains), being that since they scrapped their progressive dividend policy, the dividends have actually risen significantly to their current levels. But that's largely (I believe) because iron ore prices have risen substantially over the past few years.

So without the progressive dividend policy, Rio have effectively already warned investors that if profits drop - e.g. if iron ore prices drop, etc - then they won't have any hesitation in dropping the dividend. They've made it clear that they are not attempting to set the dividend at any kind of sustainable level.

They've just gone back to the basics... keep a proportion of the profits to fund future investment, anything left over, pay it out.

If their profits are high, then that could be a lot.

If the profits are low, that could be a little.

They aren't going to try and smooth out the payments at all. If they drop, they drop.

I don't remember exactly when they ditched their progressive dividend policy, but I have a vague recollection it was the year when the interim dropped... so possibly 2016 when there was a drop in the interim ... https://www.stockopedia.com/share-price ... dividends/

At current levels, (without the progressive policy) the current dividend (excl. specials) is now substantially above the dividend around that time.

Maybe iron ore prices will persistently stay high, competitors won't bother upping production, etc, so that Rio can keep paying out such dividends.

Maybe.

But, the board - by ditching their progressive policy - isn't making any claim that they think current dividend levels are in anyway sustainable. In fact, by ditching their progressive policy, they're basically saying they've given up trying to judge what is a sustainable dividend level.

Since for me, my holding in Rio had grown substantially overweight, the yield (albeit before this latest rise) meant that I could switch into a high yield global ETF, like IDVY, and (at the time I sold), largely retain the same income, but from a much more diversified set of companies. (Though I'll admit that isn't strictly a pure HYP move being an ETF, sorry.)

I do still hold 50% of what I had in Rio, but prior to selling the first 50%, I just felt it was too big a proportion to be holding in a company that had already warned dividends could go either way in future - with dividends substantially now above what they were when they did have a progressive policy... well, it just left me thinking the risks are perhaps more to the downside (famous last words - but at least I still have of 50% of my original holding ).

[Bouleversee]

That all sounds very sensible. Maybe I should buy some of those as well. My Rio holding was not very large and now is large enough. I actually prefer it when companies only pay out what they have earned. The ones who have paid out more than that because of some previously declared policy are the ones who have come to grief.

[Arborbridge]

So without the progressive dividend policy, Rio have effectively already warned investors that if profits drop - e.g. if iron ore prices drop, etc - then they won't have any hesitation in dropping the dividend. They've made it clear that they are not attempting to set the dividend at any kind of sustainable level.

They've just gone back to the basics... keep a proportion of the profits to fund future investment, anything left over, pay it out.

Well, I must say, going back to basics is rather sensible: I'd prefer that to the opposite. If I really didn't like the "lumpiness" - bearing in mind that with a good number of different shares, the lumps get smoothed out - I wouldn't hold RIO at all, or I'd buy a collection of resources shares via an IT.

As it is, RIO looks worth an investment, unless one is fearful of a falling knife.

Arb.

PS I don't hold, but sometimes tempted! I have BLT instead.

[idpickering]

I hold both Rio Tinto and BHP Billiton, in equal weighting on a capital value basis. Both are doing well IMHO, and are winners in my HYP, and I shall continue to hold both for the long term.

Ian.

[monabri]

Since for me, my holding in Rio had grown substantially overweight, the yield (albeit before this latest rise) meant that I could switch into a high yield global ETF, like IDVY, and (at the time I sold), largely retain the same income, but from a much more diversified set of companies. (Though I'll admit that isn't strictly a pure HYP move being an ETF, sorry.)

Something that we should be aware of!

https://monevator.com/investor-compensation-scheme/

"If you own investments domiciled beyond the UK – say in Ireland or Luxembourg – then the FSCS safety net doesn’t protect you at all. Instead, you may fall under the aegis of a much less generous scheme, and you may not even get that.

Most Exchange Traded Funds (ETFs) available to UK investors – and many index funds – are domiciled in Ireland, so there’s a good chance you don’t have the protection you thought you had."

[Bouleversee]

Since for me, my holding in Rio had grown substantially overweight, the yield (albeit before this latest rise) meant that I could switch into a high yield global ETF, like IDVY, and (at the time I sold), largely retain the same income, but from a much more diversified set of companies. (Though I'll admit that isn't strictly a pure HYP move being an ETF, sorry.)

Something that we should be aware of!

https://monevator.com/investor-compensation-scheme/

"If you own investments domiciled beyond the UK – say in Ireland or Luxembourg – then the FSCS safety net doesn’t protect you at all. Instead, you may fall under the aegis of a much less generous scheme, and you may not even get that.

Most Exchange Traded Funds (ETFs) available to UK investors – and many index funds – are domiciled in Ireland, so there’s a good chance you don’t have the protection you thought you had."

Actually, Mon, it was On the Move who wrote that, not me, but thanks anyway for the useful information. Unless I missed it when reading through the linked article rather quickly, it doesn't say how one can establish whether the investors assets are ring-fenced. I have many more times than £85k invested with I-Web, mostly in individual shares but also a few ITs and one fund. Should I be worried? I used to have an ISA account with Selftrade (my children still do) and I seem to remember them assuring me that there was no risk to equities held under a nominee arrangement. I'm not sure about cash, however. I never used to have much of that in my accounts but recently takeover proceeds and dividends have totted up to a silly amount which I need to decide what to do with.

Incidentally, what happens if the third party holding the assets goes bust? I have no idea who they are.