Is now the moment to buy Rio Tinto shares?

I have been looking for miners Rio Tinto (LSE: RIO) has been an addition to my stock portfolio for some time. The company is well-known for generating good dividends in recent years. This is a well-established mining business that I think should continue to thrive for decades. So, could now be the time for me to buy Rio Tinto shares?

Big dividend cut

The company announced its full-year results today, including details of its final dividend.

The total dividend for the year has been cut by 53%, a big drop.

But it still stands at $4.92 per share, which is around £4.07. With Rio Tinto shares changing hands at more than £60 apiece, that means a forward yield of 6.8%.

So, while the dividend may be cut sharply, the yield is still higher than most offer FTSE 100 company. That’s attractive to me.

What’s next

Last year, profits, profits and free cash flow at miners all fell sharply. Metal prices could continue to fall, so earnings could fall again this year. This could mean further dividend cuts.

But even in a bad year, Rio Tinto did well. It is sent what is called “solid financial results“. Combined sales revenue is over $1bn per week on average. Free cash flow nearly halved, but still topped $9 billion. Profit after tax equates to around $240m each week. That’s over a million dollars an hour!

As the numbers show, Rio Tinto is an absolute monster of a business. I can keep it that way. Benefit from a broad portfolio of projects, a large customer base and deep expertise in mineral extraction and sales practices.

I was tempted to buy it

The main problem when it comes to how profitable Rio Tinto is, however, is largely out of our control. Mining is a cyclical business. Prices for many metals fell last year, after a record 2021.

If the price continues to fall, so will the profits. This may mean smaller dividends.

But I like Rio Tinto’s strong position in the industry I expect to benefit from strong long-term demand. Even after today’s cut, the dividend still looks attractive to me.

There is some evidence that iron ore prices are rising. China’s reopening could spur industrial activity and demand for metals like iron. If that happens, buying Rio Tinto shares at the current price could be a profit for my portfolio.

Wait and see

But I think it’s too early to call the bottom of the metal price cycle. Depending on what happens in the global economy over the next few years, prices may rise. However, he may still be a long way from here.

So, even though I was tempted to buy Rio Tinto, I held off.

After I think there are clear signs continuously that metal prices will maintain or increase the level, I will revisit my decision.