At the current Rio Tinto Limited (ASX: RIO) share price, I think the dividends on offer from Blackmores Limited (ASX: BKL) and Integrated Research Limited (ASX: IRI) could be better.
What's wrong with Rio Tinto?
At today's prices, Rio Tinto shares trade on a dividend yield of around 3.6% fully franked. That's based on the $2.20 in dividends it has declared over the past 12 months. However, a year before that, Rio shares were offering dividends closer to $2.92 per share. The reason behind the fall in dividend payments is why I wouldn't rely on Rio Tinto shares for income.
Rio Tinto, just like BHP Billiton Limited (ASX: BHP), was forced to cut its dividend because commodity prices fell. Specifically, the price of iron ore, coal, aluminium and copper were down in the dumps.
Despite its size, Rio Tinto has no control over the prices of its products. It sells into a 'commodity' market where the lowest price offered is the one taken by Chinese customers. That's because it doesn't matter whose materials they use to make their steel, cables, cars, etc. — it's all the same.
I prefer companies that have a strong brand name, leading products and clear scope for growth.
Blackmores
Blackmores increasingly sells its products into China. Although the company recently cut its dividend, the reduction came as a result of regulatory changes. Blackmores is still a premier brand of vitamins and 'good-for-you' products. Importantly, a recovery in sales could be on its way. At today's prices, it yields a trailing dividend of 3.3%. Blackmores is a higher-risk investment, in my opinion.
Integrated Research
Integrated Research is a much smaller company, so you may never have heard of it or its products. It develops software used to monitor computer systems and run diagnostics. Its software is highly regarded and used by big businesses. Shares in the $480 million company don't come cheap — but it offers a dividend of 2.3%. Despite that, Integrated Research's operations provide consistent revenue and its long-term growth outlook is promising.
Foolish Takeaway
You could try and pick the cycle in commodity prices. Then buy resource companies that will benefit from increases in market prices. However, if you are a long-term investor I think there are better ways to spend your time and money over the next decade.
Blackmores and Integrated Research are dividend shares worthy of a spot on your long-term watchlist.
