John ZechnerRio TintoRIOBUY ON WEAKNESSJun 10, 2022
Believes dividends at the company are safe given price of commodities.
Risk is that M&A will result in paying too much for assets at the top of the market.
New management awareness of shareholders in the form of debt reduction, share buybacks & dividends.
Is struggling given perceived weakness of China's economy. He's owned this a long time and won't sell it. RIO generates a lot of free cash, has a reasonable development pipeline, a great iron business and a good copper business. But traders may see near-term weakness given China's outlook.
Mainly iron ore, but also copper. Good assets in a lower cost jurisdiction. World-class. Variable dividend based on earnings. Tons of free cashflow. Looking to expand copper, a big growth driver for the next decade. Still cheap. Lots of years left for good returns in the sector.
Followed the trend of buying back shares, increasing dividend, divesting non-core assets. These companies are in much better shape financially than ever before. Capex discipline. Will benefit from China coming back online. Cheap multiple.
Remains in an uptrend, testing the downtrend. If it can break out above that, you've really got blue skies. Looks like it's trying to start another commodity super-cycle.
RIO vs. BHP Both really well run and focused. Trimming portfolios and becoming more efficient. Leans toward BHP, but RIO is good as well. Cautious on the space right now, potential for a recession, and we don't know how deep. Both would get hit in a recession. Steer clear right now, look for something more defensive.
It has some relationship with the commodity price of iron ore so its dividend varies over the years. It is coming down to 7 to 8% but this still makes it still a good income stock.
Mining companies being hit hard by rising interest rates.
Investing capital into energy stocks instead.
Expecting dividend to be maintained.
Believes is a good long term hold.
High dividend yield. Iron ore prices were over $200/tonne, but now they're $100, still extremely high. Steel looks particularly weak. Even in a recession, we won't go back to $50, but the yield should normalize closer to 7%. Wait and see, start to dabble in Q4.
RIO vs. BHP For commodities as a whole, he's more of a trader, and he's not trading right now. Cyclicality impacts growth trends. Over time, the chart action is pretty horizontal. Both are good companies. Trade, don't put them in the closet and forget about them.