The Rio Tinto Limited (ASX: RIO) share price is now on watch after the iron ore miner announced its HY21 result with a big dividend.
Rio Tinto HY21 result
The iron ore miner revealed that its operating cashflow had increased 143% to US$13.66 billion after a strong run of the iron price. Prices for aluminium and copper were also strong.
Free cashflow saw an even bigger rise, with an increase of 262% to US$10.2 billion.
The underlying earnings looked good too. Revenue increased by 71% to US$33 billion. This drove underlying EBITDA (EBITDA explained) higher by 118% to US$21 billion. Net earnings climbed 271% to US$12.3 billion.
Underlying profit/earnings per share (EPS) went up by 156% to 751.9 cents. This strong profit allowed the business to declare very big dividends.
Rio Tinto HY21 dividend
The Rio Tinto board decided to declare an ordinary interim dividend of US$3.76 per share, an increase of 143%.
But the board has also declared a special dividend of US$1.85 per share.
That brings the total half-year dividend to US$5.61, an increase of 262%.
The cashflow has been so strong that the balance sheet went from net debt of US$664 million at 31 December 2020, to net cash of US$3.14 billion at 30 June 2021.
Management comments
Rio Tinto CEO Jakob Stausholm said: “Government stimulus in response to ongoing COVID-19 pressures has driven strong demand for our products at a time of constrained supply resulting in a significant spike in most prices.
“We are further strengthening the portfolio with our commitment to fund the high-quality Jadar lithium project, which signals our large-scale entry into the fast-growing battery materials market.
“We are making progress on our four priorities, identifying opportunities for operational improvement, advancing our ESG agenda, taking important investment decisions and stepping up our external engagement.”
What to make of this for the Rio Tinto share price
Rio Tinto has committed $2.4 billion of funding to one of the world’s largest greenfield lithium projects, subject to various approvals and so on. The first saleable production is expected to be in 2026 at a time of strong market fundamentals with lithium demand forecast to grow 25% to 35% per year over the next decade. The mine is expected to have a 40-year mine life.
The ramp up will see full production in 2029 when it will be the largest source of lithium supply in Europe. It could supply enough lithium to power over one million electric vehicles per year.
The miner is really rewarding shareholders and the ongoing growth into other resources is a good diversification strategy.
It looks like a very promising income idea at the moment, but there are other ASX dividend shares which might be better value considering how high the iron ore price is right now. It’s not likely to stay this high forever.
