A First Look at Giant Miner Rio Tinto

I use Google Alerts on “high dividend stocks” to see what is being published online on the subject.  Insider Monkey’s article got my attention because I hadn’t done a first look on any of his “5 High-growth, High Dividend Stocks”.  The five stocks are Rio Tinto (RIO), Enterprise Product Partners (EPD), Siemens AG (SI), Taiwan Semiconductor (TSM), and British Sky Broadcasting Group PLC (BSY)

http://www.insidermonkey.com/blog/5-high-growth-high-dividend-stocks-20007/

I write a first look at article on each of these.  Rio Tinto PLC (RIO) is the first one up.

Rio Tinto (RIO)

Price: $47.46

Shares: 1.85 billion

Market capitalization: $87.9 billion

What does the company do to earn profits?  Rio Tinto searches for and extracts a variety of minerals worldwide, with the heaviest concentrations in North America and Australia. Major products include aluminum, copper, diamonds, energy products, gold, industrial minerals, and iron ore. The 1995 merger of RTZ and CRA, via a dual-listed structure, created the present-day company. The two operate as a single business entity. Shareholders in each company have equivalent economic and voting rights in Rio as a whole.

Morningstar’s take: Rio Tinto is a top-tier global miner along with BHP Billiton BHP, Brazil's Vale VALE, and U.K.-based Anglo American AAUKY. A world-class asset base and capable management make Rio Tinto one of the few miners to earn more than its cost of capital through the commodity cycle. Geographic and product diversification give the company relatively stable cash flows and lower operating risk than many of its mining peers. Most revenue comes from the relative safe havens of Australia, North America, and Europe, though operations span six continents.

Bonds outstanding: none

Times bond interest earned: not applicable

Preferred stock: none.

DIVIDEND RECORD  Rio Tinto pays a semi-annual dividend.  The dividend payment amounts vary and are not predictable.  Here is the 5 year dividend history chart:

Dividend: $1.65 (annual dividend from FEB 2012 $0.91 and AUG 2012 $0.74)

Dividend yield: 3.4% ($1.65 annual dividend / $47.46 share price)

Dividend payout ratio: 73% using earning power of $2.24 per share from Google Finance –OR- 42% using average adjusted EPS of $3.91

EARNING POWER – $3.91 @ 1.85 billion shares

(Earnings adjusted for changes in capitalization)

Year	EPS	Net Income	Shares	Adjusted EPS
2006	$5.56	$7,438 M	1,339 M	$4.02
2007	$5.66	$7,312 M	1,291 M	$3.95
2008	$2.85	$3,676 M	1,334 M	$1.99
2009	$2.75	$4,872 M	1,770 M	$2.63
2010	$7.26	$14,324 M	1,973 M	$7.74
2011	$3.01	$5,826 M	1,936 M	$3.15
2012	?	?	1,850 M	?

Six year average adjusted earnings per share is $3.91

Consider contrarian buying below $31.28 (8 times average adjusted EPS)

Consider value buying below $46.92 (12 times average adjusted EPS)

Rio Tinto is currently trading at 12.1 times average adjusted EPS.  This stock is priced for investment.

Consider speculative selling above $78.20 (20 times average adjusted EPS)

BALANCE SHEET – Morningstar’s database is not working properly, so I don’t have the five year balance sheet data for Rio Tinto.

Book value per share: $33.98 ($62.861 B equity / 1.85 B shares)

Price to book value ratio: 1.4 (under 1.0 is good)

Tangible book value: $21.00 (equity - $23.997 B in intangibles / 1.85 B shares)

Price to tangible book value ratio: 2.26 (under 1.0 is really good)

Current ratio: 1.51 (over 2.0 is good) latest quarter

Quick ratio: 1.07 (over 1.0 is good)

Debt to equity ratio: 0.35 (lower is better)

Percent of total assets:

            Real assets (property, plant, and equipment) – 58.06%

            Current assets – 15.76%

            Intangibles – 13.38%

            Other long term assets – 12.8%

CONCLUSION – Rio Tinto is currently a decent dividend stock, but its dividend is not entirely safe.  The global recession currently underway will drop Rio Tinto’s price.  Their price will drop because worldwide demand for commodities lessens during recessions.  Their customers will buy less mined commodities at lower prices, which will hurt profitability.  Stay away from RIO until the depths of the recession.  This could be a long time.

DISCLOSURE – I don’t own Rio Tinto (RIO).

Subscribe today for free at www.myhighdividendstocks.com/feed to discover high dividend stocks with earning power and strong balance sheets.

Be seeing you!

I've been wrong about AGNC for the past year.

I’ll admit it.  I was wrong about American Capital Agency Corp. (AGNC) share price direction in the last year.  I thought that their shrinking interest rate spreads and dividend cuts would have hurt the share price, but they haven’t.  There has been a sustained 10 month rally in AGNC stock since November 2011.  Eventually this rally must end, but Keynesian investors don’t seem to care.  They love the Federal Reserve’s QE3.

AGNC is a mortgage REIT.  They make money by borrowing short term and then lend the money long term by buying agency mortgage backed securities.

Subscribe today for free at www.myhighdividendstocks.com to discover high dividend stocks with earning power and strong balance sheets.

Be seeing you!

Marc Faber: Fed's QE Forever is Ludicrous; No Country Has Become Rich From Consumption

Marc Faber is dead on in this short article.  He points out that if money printing solved problems, then Zimbabwe would be an economic powerhouse.  If running huge deficits worked, then Greece would be the most successful European economy.

The Keynesian in charge of the central banks around the world are madmen.

Her is the short article from Marc Faber:

http://www.bi-me.com/main.php?id=59324&t=1&cg=4

Be seeing you!

What If November Changes Nothing? by Andrew P. Napolitano

Neither candidate for the American presidency wants to end the Federal Reserve. Here is a list of many of the things they agree on. This is a race between a socialist and a national socialist. I won't be voting.

http://lewrockwell.com/napolitano/napolitano67.1.html

Be seeing you!

Your First Step into the World of Bitcoins; An Excellent Primer.

The Wall Street investing game is rigged against you.  The theft of customer funds after the MF Global bankruptcy should have you worried about the safety of your brokerage account assets.

http://tinyurl.com/MFGlobalTheft

There is a new currency that you can buy to thwart the efforts of the Federal Reserve and the Wall Street banksters.  Do you have some of your investments in bitcoins?  Do you even know what a bitcoin is?  If you answered no to these two questions, then you had better read this concise, non-technical explanation of the bitcoin ecosystem:

http://blog.bitinstant.com/blog/2012/7/5/a-business-primer-on-the-bitcoin-ecosystem-erik-voorhees.html

You can listen to the article while driving in your car here:

        <!—Start of SpokenText player à

        <script type=”text/javascript” language=”javascript”>

               var recordingUrl = “http://www.spokentext.net/members/Gorbash91/A_Business_Primer_on_the_Bitcoin_...”;

               var width = “100”;

               var height = “20” ;   

        </script>

              

        <script type=”text/javascript” language=”javascript” src=”http://www.spokentext.net/display_player.php”></script>

        <!—End of SpokenText player à

I will be writing more about bitcoins in the future.  I’ll discuss how many of them that there will ever be, how they can be secured, and how much it costs to convert your national currency into bitcoins.

Be seeing you!

Keynesians make no sense. See why with some humor.

This guy does a humorous job of explaining the stupidity of Keynesian economics in a few minutes.

Be seeing you!

The Importance of Saving Money

South Park clip inspired by MF Global and other legal thefts:

http://www.southparkstudios.com/clips/222624/the-importance-of-saving-money

Don’t put your hard earned savings into the common brokerage accounts.  Consider putting some of your savings into bitcoins.  Learn more at www.weusecoins.com .

Be seeing you!