As a bog-standard retail investor, one way I can get an edge is to look at the past performance of a stock.
If I can understand past share price moves, it might help me predict future ones.
And Rio Tinto (LSE: RIO) shares have been hard to ignore recently. The Anglo-Australian mining behemoth has had an incredible few months.
Let’s say I’d invested £500 in the firm. Here’s what would have happened to it over the last six months.
If I’d invested £500
A Rio Tinto share would have cost me £49.91 six months ago, before rising to today’s price of £54.41.
The company pays out superb dividends too. I have 222p in payments per share to add on here.
All in all, a £500 stake would now be worth £567.28. So I’d have received an excellent 13% increase on my original amount. Is that enough for me to pick up some shares?
A strong 2022
The crucial detail here though is that in 2022, energy and mining companies enjoyed a banner year.
Last year, the share prices of firms like Shell, BP, Glencore and of course Rio Tinto flew up. These increases came about due to the energy crisis that resulted from the war in Ukraine.
What that means for me is that the 13% increase is likely unsustainable.
But breaking it down further, the 13% comes from around 9% from the share price and 4% from dividends. And that weighty dividend might be enough on its own for me to buy a few shares.
7% returns a year?
Rio Tinto currently pays out a superb 7.48% annual yield. That’s the ninth highest return on the entire FTSE 100. The British index is renowned for its high dividend payments.
At that payout, I’d earn a £1,000 yearly passive income from a £13,369 investment in shares of the firm.
Better still, the firm’s dividend history shows that 6%+ returns have been normal.
| 2018 | 2019 | 2020 | 2021 | 2022 | |
| Payout | 226p | 493p | 297p | 691p | 574p |
| Annual yield | 6.07% | 5.76% | 5.43% | 10.06% | 9.11% |
Paying out since the 1990s
The icing on the cake here is that Rio Tinto has paid out a dividend every single year since 1992, the last year I can find data.
Management paid out throughout the Covid pandemic or the recession in 2008. Lots of other firms cut their dividends in those crises.
That’s a great sign that I’d receive those dividends long into the future.
Are there risks? Well, the amount of earnings paid out as dividends is near 100% in some years.
Paying out all profits means little money left for growth or paying off debt. Thus, the dividend yield might need to come down in the future.
If I had £1,000
Let’s say I had a spare £1,000 to invest right now. Would I put it into Rio Tinto?
I’d have to say that I would. A 7% dividend is a great start. And long term, I’d feel safe investing in a well-diversified company with a great track record of rewarding its shareholders.
For these reasons, I’ll look to open a position in the near future.
