Rio Tinto could cut dividend

A week after it was suggested BHP Billiton may change its policy of maintaining high dividends despite a slumping market, rival Rio Tinto is reportedly set to make the same move in its annual results announcement.

Rio will announce its full-year results on Thursday this week.

Investors are reportedly expecting the miner to announce lower dividends as a result of the slumping iron ore sector.

The British-Australian multinational miner, which also operates in aluminium, copper and coal, and other mineral sectors, is (assuming BHP lowers its dividend) the last major to retain its policy of progressive dividends despite the mining turndown.

Anglo American, Glencore and Vale have cut or stopped their dividend in recent months.

BHP Billiton was last week implored by US ratings agency Standard & Poor’s to change its policy.

S&P downgraded the credit ratings of BHP Billiton Limited and BHP Billiton PLC from A+ to A. The rating of BHP Billiton’s senior secured notes was also lowered from A+ to A, and that of its subordinated notes from A- to BBB+.

The agency placed BHP on ‘CreditWatch with negative implications’ ahead of the announcement of BHP’s half-year results ending December 31, 2015, scheduled for release on February 23.

The move all but ensured BHP will lower its dividend, according to market analysts.

Investor chatter this week tied Rio Tinto to a similar move.

However, Penanga Capital fund manager Tim Schroeders, whose fund invests in Rio Tinto, reportedly suggested to Fairfax that Rio may maintain its dividend policy, as a “point of differentiation,” over the next 12 or so months.

In the long term, he was quoted to have said, the policy would likely change, though.

“Presumably BHP will address the situation in the next few weeks, then Rio would be the only guys out there doing it on their own, and they are not going to get rewarded for it,” Schroeders reportedly said.