Out Of Office

Image source: Blue Flourishes and Andrey_Kuzmin on shutterstock

What's going on?

Rio Tinto reported a bumper 2021 on Wednesday, so lets hope the miners most committed employees have earned themselves a bit of a break.

What does this mean?

The prices of essential commodities think metals, food, and energy went through the roof last year, as a buckling supply chain struggled to go toe to toe with sky-high demand. That played right into Rio Tintos hands: the miner makes around 80% of its money from steelmaking ingredient iron ore, which hit its own record high during the boom. So it follows that Rios profit rose 72% last year versus the year before to hit $21 billion a new record for the miner. But all that cash wont be sitting idle, with Rio also announcing that itll be paying investors $7.7 billion worth of dividends. Thatll bring the companys payouts for the year to nearly $17 billion the second-biggest total in the history of the FTSE 100.

Why should I care?

For markets: Investors strike gold.
Rio Tinto isnt the only miner spreading the love: BHP said last week that itd be paying its biggest half-year dividend ever, while Glencore announced a $4 billion payout a day later. That might be why analysts are expecting the industrys payouts to represent almost a quarter of all those made to UK investors last year a far cry from the 4% they represented in 2016 (tweet this).

The bigger picture: The industry has been shifting.
This substantial uptick in payouts over the last few years is a sign of a broader transformation in the industry. Miners have deliberately been moving away from sinking money into risky megaprojects, which can take a long time to actually translate into gains for investors. Instead, theyve been more focused on paying off debt, putting money directly into shareholders hands, and venturing into smaller projects like copper and lithium mining that are essential to the clean energy transition.

Originally posted as part of the Finimize daily email.

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