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Rio Tinto Logo
  • commented 11/18/15
  • tags: X RIO
  • Rio Tinto (LSE: RIO), the company appears to be doing all of the right things through which to stage a long term recovery. Clearly, the falling price of iron ore which, earlier in the year, reached a ten-year low has been a major drag on performance, but Rio Tinto's increased production is likely to offset this decline to an extent in future.

    More importantly, though, is the improved position which increasing production volumes has on a relative basis. In other words, Rio Tinto continues to gain versus its sector peers, with the company's ultra-low cost base and sound financial standing likely to mean that it can outlast the competition during a tough period for the wider mining sector.

    Furthermore, Rio Tinto is reducing capital and exploration expenditure and, as its recent results showed, cash flow appears to be sufficient to maintain its current level of dividend as well as complete the necessary sustaining capital expenditure. As such, and while a dividend cut cannot be ruled out, dividends per share are expected to be covered 1.13 times in the current year. With Rio Tinto offering a yield of 6.5%, it remains enticing for income-seeking investors.

    Of course, Rio Tinto's bottom line is forecast to fall by 49% this year and by a further 9% next year. This has the potential to keep investor sentiment pegged back but, for long term investors, the company's strategy looks set to place it on a sound growth trajectory. And, with it trading on a price to earnings (P/E) ratio of 13.6, it appears to offer good value for money, too.

    Meanwhile, storage specialist Big Yellow Group (LSE: BYG) is experiencing rather different trading conditions to Rio Tinto. It continues to see demand for its services increase, with today's half-year results showing that occupancy rates have risen from 73.2% in March 2015 to 77.3% at the end of September 2015. A key reason for this is a lack of competition in the south east and, looking ahead, this scarcity value is likely to see Big Yellow's occupancy rate rise further.

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    Rio Tinto (LSE: RIO), the company appears to be doing all of the right things through which to stage a long term recovery. Clearly, the falling price of iron ore which, earlier in the year, reached a ten-year low has been a major drag on performance, but Rio Tinto's increased production is likely to offset this decline to an extent in future. More importantly, though, is the improved position which increasing production volumes has on a relative basis. In other words, Rio Tinto continues to gain versus its sector peers, with the company's ultra-low cost base and sound financial standing likely to mean that it can outlast the competition during a tough period for the wider mining sector. Furthermore, Rio Tinto is reducing capital and exploration expenditure and, as its recent results showed, cash flow appears to be sufficient to maintain its current level of dividend as well as complete the necessary sustaining capital expenditure. As such, and while a dividend cut cannot be ruled out, dividends per share are expected to be covered 1.13 times in the current year. With Rio Tinto offering a yield of 6.5%, it remains enticing for income-seeking investors. Of course, Rio Tinto's bottom line is forecast to fall by 49% this year and by a further 9% next year. This has the potential to keep investor sentiment pegged back but, for long term investors, the company's strategy looks set to place it on a sound growth trajectory. And, with it trading on a price to earnings (P/E) ratio of 13.6, it appears to offer good value for money, too. Meanwhile, storage specialist Big Yellow Group (LSE: BYG) is experiencing rather different trading conditions to Rio Tinto. It continues to see demand for its services increase, with today's half-year results showing that occupancy rates have risen from 73.2% in March 2015 to 77.3% at the end of September 2015. A key reason for this is a lack of competition in the south east and, looking ahead, this scarcity value is likely to see Big Yellow's occupancy rate rise further.
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