Having dropped more than 5% over the last month, Rio Tinto (LON:RIO) was recently trading close to £70 per share. The stock has declined due to the weakness in commodity prices and this dip is an opportunity I would consider investing in. One of the largest miners in the world with a portfolio of world-class operations over different commodities, Rio Tinto is well poised to go higher in the coming months. It mines iron ore, which is a commodity trading at sky-high prices. Let’s take a look at the two reasons this stock should be on your watchlist.
Rio Tinto is the perfect dividend stock to look closely at. The demand for commodities is always going to rise and Rio Tinto will have an edge in the industry. Considering the fact that steel continues to contribute significantly to the revenue of the company, there is no slowing down.
What makes Rio Tinto a favourite is the dividend payout. The company has paid the shareholders in regular dividends and it pays an interim dividend, special dividend and final dividend.
Rio Tinto declared a final dividend of 221.86 pence for 2020 and a special dividend of 66.77 pence. I believe the company will continue to pay dividends in the coming periods and there will be a three-digit final dividend for 2021. The company enjoys a dividend yield of 7.30% and over the last decade, the company has increased the dividend 7 times.
The revenue numbers are proof that the company believes in sharing the profit with investors and will continue to do so. It will keep generating passive income for investors.
Partnerships that will take the stock higher
Rio Tinto recently signed a Memorandum of Understanding with POSCO, the largest steelmaker in South Korea. This partnership is a huge step towards the long term goal of both companies. Their ambitious goals of achieving net-zero carbon emissions by 2025 seem closer now. They will work together on different technologies across the steel value chain.
Rio Tinto is committed to its net-zero goal and has signed many partnership agreements with other steel producers including Nippon Steel Corporation in Japan. Companies around the world are pledging to the net-zero emission target and mining companies are making the right moves.
The company has also partnered with Schneider Electric for decarbonisation and to build a sustainable market ecosystem. Both the companies are also developing digital platforms that can be used to deploy on the mining supply chain. With these unique partnerships, the company is making its mark in the industry and is expanding its market share. Each partnership will help take the company closer to its long term goals and generate higher value.
The bottom line
The decline in the company's share price is a great chance for investors to keep the stock under their watchlist. Rio Tinto is a stable company with strong fundamentals and high dividends. Despite the recent decline in the stock, it is a hot stock for the long term.
Rio Tinto has the potential to generate high revenue and take the stock higher. The demand for commodities is only going to increase in the coming years and Rio Tinto will be leading the industry with its latest technology and smart partnerships.
Not Investment Advice
Note: Views expressed are those of the writer. The author does not own any stocks mentioned. The article is information, not advice. Share prices can rise and fall. Past returns are not a guide to the future. Please do your own research.