Rio Tinto (LON:RIO) has reiterated its guidance for the current year as it posted shipments for 2016 in line with expectations. The results have prompted analysts and fund managers to flag a potential dividend hike or even a share buyback next year.
Rio Tinto’s share price jumped in London yesterday, adding 2.06 percent to close at 3,488.00p, outperforming the blue-chip FTSE 100 index which ended the session marginally lower. The group’s shares have gained more than 112 percent over the past year, as compared with about a 26-percent rise in the Footsie.
Rio Tinto announced in a statement this morning that its Pilbara iron ore shipments had reached 327.6 million tonnes last year, in line with guidance and three percent higher than 2015. The company noted that its production and shipments guidance for 2017 remained unchanged from the update given at an investor seminar last month.
“Our disciplined approach remains in place in 2017, with the continued focus on productivity, cost reduction and commercial excellence,” the group’s chief executive J-S Jacques said in a statement. “This will ensure that we continue to deliver value for our shareholders.”
Two fund managers told Reuters that Rio Tinto’s 2016 performance and outlook for the current year could prompt the board to consider boosting shareholders’ returns, including buybacks.
“Depending on what commodity prices are like through the end of the year and what options they have in terms of reinvestment, we may see some form of capital return,” said Arnhem Investment Management portfolio manager Neil Boyd-Clark, as quoted by the newswire. Reuters further notes that Shaw & Partners analyst Peter O’Connor believes that the blue-chip miner could generate as much as $6 billion in free cash this year and again in 2018, setting the stage for higher returns to investors.