When it comes to dividends, it is hard to look beyond Rio Tinto Ltd (ASX: RIO).
Each year the mining giant rewards its shareholders with some of the largest dividends you will find on the Australian share market.
For example, last month when Rio Tinto released its full-year results, it declared a fully franked final dividend of US$2.25 per share.
This brought the full-year Rio Tinto dividend to US$4.92 per share, which equates to a total payout of US$8 billion or A$12 billion.
To put that into context, that's the current market capitalisation of both lithium miner Pilbara Minerals Ltd (ASX: PLS) and airline operator Qantas Airways Limited (ASX: QAN).
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Where is the Rio Tinto dividend heading?
The good news is that Goldman Sachs believes investors can expect more of the same for at least the next couple of years.
Its analysts expect an 8.3% increase in the Rio Tinto dividend to US$5.33 per share in FY 2023. This equates to A$7.93 and would mean a generous fully franked 6.8% yield.
Pleasingly, another increase is expected in FY 2024. Goldman is forecasting a 12.2% lift to US$5.98 per share (A$8.95 per share). Based on the current Rio Tinto share price of $117.07, this will mean a yield of 7.65%.
Finally, Goldman Sachs expects the Rio Tinto dividend to reduce to US$3.40 per share (A$5.09 per share) in FY 2025. While a dividend cut is disappointing, this still represents an attractive 4.35% dividend yield.
In summary, here's what Goldman is forecasting:
- US$5.33 (A$7.93) per share in FY 2023
- US$5.98 (A$8.95) per share in FY 2024
- US$3.40 (A$5.09) per share in FY 2025
All in all, the next couple of years look good for income investors that own Rio Tinto shares. This may partly explain why Goldman Sachs has a buy rating and $140.40 price target on them.
