Rio Tinto (RIO) Giving Out Dividend

Submitted by Craig Strzelecki on 6 March, 2007 - 18:02

Rio Tinto (RIO) is giving out 82.8 cents tomorrow (7th March 2007) on ex-dividend and today is your last chance to get in on the action; if you believe in the long term outlook for RIO, to gain exposure to the shares and capture the dividend.A fortnight ago, Macquarie Research Equities (MRE) upgraded RIO to Outperform, citing strong cash flows, and an improving outlook for iron ore and thermal coal. RIO shares have been caught up in the global equities sell off in the past week, and have fallen 10% giving up most of their 2007 gains. Overnight, base metals fell again, which could see the resources sector come under further pressure. Many analysts see this market correction as a short term phenomenon, and believe stocks such as RIO represent good buying at these levels. The prospective forward earnings multiples for both BHP and RIO (of about 8-10x) have approached the historic low on a relative basis. Given MRE's view that China will support prices at levels well above those of the historic norm and the likelihood that the recent sell-off in the all-important copper market has improved the risk-reward balance, MRE believe such a relative discount is difficult to justify. While the forward multiples are arguably strong enough to stand on their own merits, MRE believe that an improving outlook for iron ore and thermal coal has the potential to drive further (incremental) momentum in earnings and consequent PE contraction. Simply, China's evolving energy balance and insatiable appetite for iron ore has the potential to (at least) support prices at current benchmark rates. That scenario alone could drive earnings upgrades of ~US$1b for both BHP and RIO in 2008. Finally, while the market justifiably applauded BHP's recent headline-grabbing US$10bn extension to its capital management programme, MRE caution investors not to overlook the incredible capacity that remains dormant within the RIO balance sheet. Moreover, MRE point to a clearly undemanding gearing position of 11% at end CY06 and prospective free-cashflow of at least +US$13bn though 2010. How and when that strength is reflected in the share price is difficult to ascertain, but MRE believe the recent experience with BHP suggests it's a matter of when, not if.

Rio Tinto Limited is listed on the Australian Stock Exchange (ASX) under stock code RIO. You can view their investor website here. The company was listed on the ASX on 1 January, 1970. Leigh Clifford is the CEO and Paul Skinner is the Chairman for this mining resources company. Rio Tinto is a leading international mining group, combining Rio Tinto plc, a London listed public company headquartered in the UK, and Rio Tinto Limited, which is listed on the Australian Stock Exchange, with executive offices in Melbourne. The two companies are joined in a "dual listed companies" (DLC) structure as a single economic entity, called the Rio Tinto Group. The Group finds, mines and processes the earth's mineral resources - metals and minerals essential for making thousands of everyday products that meet society's needs and contribute to improved living standards. Find out the meaning of the recommendations in this primer. Browse for other stockbroker recommendations. You can use Instalment Warrants to trade RIO. Check your charts and good luck with your share trading!

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