Stock Purchase: Rio Tinto


On Thursday 15th January 2015, I bought 43 shares in the FTSE 100 Mining company Rio Tinto. The share price at the time of purchase was 2,830.28p per share. The total cost with charges included was £1,235.06.

Their average yield over the last 5 years has been below the threshold I usually invest in – 2.48%. The oil and energy sectors have experienced significant losses in share price over the last few months and Rio Tinto is no different. Their 52 week high was 3,642p per share, which is 29% higher than was at the time of purchase. Their share priced peaked back in 2008 at a whopping 5,861p per share and it plummeted to 948p just over six months later. The share price has been much more stable in recent times, although it has dropped over the last 1 yr, 3yr and 5yr period. Rio’s drop in share price over the last 6 months has been less significant than some of the other Mining companies. The drop in share price has resulted in the yield increasing to 4.16% on today’s prices. 

The dividend payment has increased for the last 5 years, which to no surprise was just after their huge share price crash. Over the last 5 years the average dividend growth rate was 28.89%. The most recent increase was 14.97%. The dividend payment is now back on track to what it was in 2007. I’m expecting the dividend growth rate to reduce further in the upcoming years and settle below the 10% mark. 

Their average dividend cover is 5.2 over the last 5 years, and for the previous financial year, the dividends were covered by 2.88

In December I made my first investment in the mining industry with BHP Biliton. The Oil, Mining, and Energy companies have been hit with significant losses in the last 6 months, and I’ve wanted to benefit from these lower rates by purchases shares in massive companies. I now own shares in the two biggest mining companies in the world. I’m not planning on investing any more capital in this industry for the time being, and I’m happy to be a shareholder in these two companies for the foreseeable future. 

What do you think of Rio Tinto? Are you investing in the Mining companies right now? or is there too much risk in it for you right now?

0 Comments

  • Dividend Legion

    Reply Reply 20th January 2015

    Hello Huw,

    This looks like a sound investment – You bought near the 52-week low price, at a time when most of the stock in the mining sector is undervalued. I think that even though the yield slightly low, it will soon grow past 3% due to the recent trend of high dividend rises.

    Personally, I bought BHP Billiton last month, which will cover the Mining sector for now – I have just started this journey, so I wouldn't want to become overly exposed to any particular sector!

    Best regards,

    Dividend Legion

  • Tawcan

    Reply Reply 20th January 2015

    Can't say I know much about Rio Tinto but from your analysis it looks like a good company to invest. Oil & gas sector is providing an excellent opportunity to invest right now.

  • weenie

    Reply Reply 20th January 2015

    Hi Huw, I first heard of Rio Tinto in 2007 as they were in the news for discovering 'kryptonite' (yes, of Superman fame!). Since then, I've followed their ups and downs and although haven't taken the plunge yet, they are on my list and like you say, I think a small holding would go well with the BLT shares.

    Good luck with these!

  • UK Value Investor

    Reply Reply 20th January 2015

    Hi Huw,

    Got this one as well, and BHP. I've owned them both for a couple of years or so and expect to continue to do so, unless the share prices shoot up (which seems unlikely at the moment). Good luck with it!

    John

  • Huw Davies

    Reply Reply 20th January 2015

    Hi John,

    Snap! I'm happy with these two mining companies. I've now got enough exposure in this sector to leave it now. I'm not expecting a major increase in the short term, but hopefully some steady, increasing dividends.

    Thanks again for stopping by and the well wishes!

    Huw

  • Huw Davies

    Reply Reply 20th January 2015

    Hi Weenie,

    What a mineral to find! It's worth investing in them for that alone is it not! 🙂

    They've been on my radar for a while too, with BHP Biliton. I'm glad I now have the top two mining companies in the world. I think that's my lot in the sector for now. The pan is to sit back and see what happens in 5+ years.

    Thanks again for stopping by!
    Huw

  • Huw Davies

    Reply Reply 20th January 2015

    Hi Tawcan,

    They're the second biggest mining company in the world behind BHP Billiton. I've had my eye on these two for a while and I feel that now the prices are relatively low I wanted to move on them.

    Cheers
    Huw

  • Huw Davies

    Reply Reply 20th January 2015

    Hi Dividend Legion,

    Welcome to the Blog! I hope it turns out to be a sound decision. I'm happy with my choice anyway.

    I think it's wise for you not to get over exposed if you're just starting out. I tried to spread my investments across sectors early on to get some diversification. I wish you all the best with your journey!

    Cheers
    Huw

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