Deteriorating commodity market conditions have significantly muddied the dividend outlook for the Footsie’s mining and energy giants.

Indeed, diversified specialists Rio Tinto (LSE: RIO) and BHP Billiton (LSE: BLT) are the latest in a long line of major resources producers to put paid to their progressive dividend policies in recent months.

Subdued raw material prices have placed huge stress on balance sheets across the sector. And with China’s economic tailspin still intensifying — factory output is now at its lowest since the 2008/2009 recession — fears abound that the days of rich shareholder rewards are now at an end.

Dividends dented

Although it refused to suspend dividends, BHP Billiton responded to difficult market conditions in February by slashing the interim payout to 16 US cents per share. This represents a colossal comedown from the 62-cent dividend afforded in 2015.

And in a worrying precursor for future payments, BHP Billiton noted that “while the continued development of emerging economies will underpin longer-term demand growth for commodities, we now believe the period of weaker prices and higher volatility will be prolonged.”

Things were slightly better at Rio Tinto, the firm electing to keep the full-year dividend for 2015 locked at 215 US cents. However, the miner warned that “with the continuing uncertain market outlook, the board believes that maintaining the current progressive dividend policy would constrain the business and act against shareholders’ long-term interests.”

Rio Tinto has said that the total dividend for 2016 “will not be less than 110 cents per share.”

Bearish brokers

In line with this prediction, the City expects a 47% earnings slide at Rio Tinto in 2016 — the third decline on the bounce, if realised — to result in a dividend of 125 cents per share.

Meanwhile, BHP Billiton is predicted to cut the dividend to just 36 cents per share in the period to June 2016, prompted by an expected 91% earnings collapse. This compares starkly with the 124-cent-per-share reward forked out in the prior period.

Many investors may be content with decent-if-unspectacular dividend yields of 4.4% at Rio Tinto and 3.1% and BHP Billiton however, snapping up the stocks in the hope of a return to plentiful payout growth in the longer-term.

The ‘new’ normal

But I believe an end to the so-called ‘commodities boom’ will result in much-lower dividends in the years ahead.

Frothy buying activity has thrust major commodity prices skywards in recent weeks, with iron ore — a critical material for both BHP Billiton and Rio Tinto — surging back above the $60-per-tonne marker earlier in March.

Still, these rises belie the worsening supply/demand imbalances washing over commodity markets, with sales-hungry suppliers failing to cut production in line with declining demand. Indeed, Goldman Sachs remains adamant that iron ore will trek back to $35 per tonne by the close of 2016.

Both Rio Tinto and BHP Billiton desperately require a sustained price recovery to pay down their mammoth debt piles — the firms carried net debt of $13.8bn and $25.9bn respectively as of December.

The operators continue to hive off assets and slash spending at a phenomenal rate to mend their battered finances, but these initiatives in isolation aren’t enough to boost their financial health, naturally.

So with weak commodity prices likely to persist for the foreseeable future, I believe that those expecting a strong dividend improvement at either Rio Tinto or BHP Billiton will end up sorely disappointed.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Rio Tinto. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.