Rio's Dividend Hike Dominates Results

While Morningstar analysts think the financial position of the FTSE 100 miner is very strong, they think the shares are overvalued

Mathew Hodge 1 March, 2019 | 11:18AM
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Rio Tinto

Dividends dominated Rio Tinto’s 2018's financial results, in which the company said it has returned over $13 billion to shareholders. The company paid a $2.43 per share special dividend with the proceeds from its earlier asset sales. Most of this was from the exit of coal with Rio Tinto now completely out. The final dividend $1.80 per share brought the full year pay out to $5.50 including the special dividend. The financial position is very strong. Rio had $0.3 billion net cash at the end of 2018. On an adjusted basis, net debt is $8.0 billion after including the upcoming dividend and tax payments and the remaining share buyback.

Adjusted net profit after tax $8.8 billion was slightly ahead of 2017’s $8.6 billion result. Underlying pre-tax profits declined from $17.4 billion to $17.2 billion, excluding the earnings from the discontinued coal operations. Productivity gains via volumes and cost efficiencies were generally offset by inflation. Rio Tinto aims to gain further productivity benefits of $0.6 billion in 2019, though we expect a large portion of the benefits to be offset by slowly rising industry inflation. Rio Tinto’s peers are also engaging on similar productivity-based initiatives.

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About Author

Mathew Hodge  is Morningstar's director of equity research, Australia & New Zealand.