I’m not so sure on that. Given a payout ratio of circa 60% and around 80% profits generated in Australia that might be wrong. Sure Mongolia and Africa iron ore ramp up might effect the earnings mix a little. But even at 50% future earnings here, and 50% overseas might mean it’s fully franked for decades to come with a likely existing franking balance in the billions or even 10 billion range.
Part of the issue is likely a European based executive team moving to Perth in my view. They’d hate that. Plus RIOs origins was Europe. But it’s really an Australian company now.
Personally I’d rather see RIO purely listed here. Index weighting alone would likely be beneficial especially with MSCI world. Brings jobs too. HQ should be Perth, not London. Makes it easier for takeovers too. Perhaps BHP takes a swipe at RIO again upon unification? Would be easier as wouldn’t have to deal with UK regulators. I’d love to see BHP Tinto as a global monopoly resource company.
Disclosure this is purely speculation and not financial advice. I hold both stocks. And I’ve added to both in the last weeks panic sell down.
RIO Price at posting:
$109.29 Sentiment: Buy Disclosure: Held
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