Rio Tinto a Cash-Cow in Commodities Bull Market

Montreal, Canada

Anglo-American heavyweight, Rio Tinto (NYSE-RIO) packs a serious punch. Like its competitor, Australian giant, BHP Billiton (NYSE-BHP), earnings have been nothing short of spectacular since 2002. Rio has its hands in almost every facet of the commodity production chain, including coal, base metals, uranium, oil, salt – you name it.

An original investment of $10,000 back in 2002 would now be worth more than $80,000, including dividends. The company just boosted its dividend payout by 20% and is buying back about $5 billion dollars’ worth of its shares this year.

Rio Tinto is now on the acquisition trail once again after hunkering down following the 2008-2009 financial crises.

Over the last two years, the company has reduced its debt load by 77% or from $18.9 billion dollars in 2009 to $4.3 billion dollars now. Rio has several billion dollars in fresh cash and wants to boost its stake in the potash sector.

If Rio Tinto was a sovereign nation, its credit rating would be among the highest grade or AAA. The company has a bull market in raw materials, continues to reduce its net debt and has more cash-flow than some governments.

From its all-time high in June 2008 at $123.75, the stock is down 40%. I’d be looking to buy Rio Tinto on any intermittent price weakness, which should materialize at some point for commodities after an explosive rally since last Labor Day.

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