Canaccord highlights cash return potential at Rio Tinto

11th Aug 2014 10:45

Canaccord Genuity has repeated its 'buy' rating for Rio Tinto on the back of the miner's strong free cash flows in the first half.First-half results from the company last week showed lower-than-expected net debt and markedly lower capital expenditure than anticipated, Canaccord said.As such, the board said it now intends to make a "material" distribution to investors when it announces its full-year results in February next year."After a period regaining control over its cash flows, RIO, like many large mining names is now moving towards the happy position of having surplus cash. This is over and above its reduced growth ambitions and need to cut its net debt position. "This drives a likely uplift of the yield on offer to the names, as management can supplement its progressive dividend yield with a further return to shareholders."Canaccord foresees Rio Tinto's shares offering a yield as high as 6% on 2015 estimates, rising to nearly 9% on 2016 forecasts, on the back of its dividend plus potential cash distribution.The target price for the shares has been lifted from 4,145p to 4,165p.The stock was up 2.8% at 3,474p by 10:44.BC