I still hold it. The yield now is 13.5% which is nothing to grumble about, though I'm not sure how sustainable that is since Rio Tinto has recently announced it's dropping its policy of growing its dividend for this year, and it's a 12.4% holding for the trust.
Yes looks like both Rio and BHP dividends will be under pressure. Dividends relating to their 2015 financial year should/could be OK, but anything relating to 2016 earnings will have a big question mark. These two are usually a significant part of any resources fund.
I'll post the BHP wash up when it reports.
From the Broker, this is the analysis for Rio ...
Rio Tinto’s underlying earnings for CY15 were in line with consensus expectations,
but Ord Minnett notes the following surprise in the result:
1) The dividend policy has been changed to a 40–60% payout ratio of
underlying earnings, with a minimum 2016 payout of US$1.10 per share,
representing a 3.8% yield, and a 60% payout in 2017, implying a 1% yield
on our forecast EPS;
2) Net debt was lower than expected at US$13.8 billion, due to better-than expected
working capital management; and
3) Capital expenditure guidance was cut again – to US$4 billion in CY16,
down from US$5 billion, and to US$5 billion in CY17, down from
US$7 billion.
Overall, we regard the change in dividend policy as an appropriate response to the
downturn. However, Rio Tinto no longer offers an attractive dividend yield beyond
CY16 based on our forecast prices, which could see some income-focused
investors exit the stock over the near term.
Ord Minnett view – Following the dividend change and cut in capital expenditure
guidance, we forecast gearing to remain comfortably within the 20–30% guided
range over the medium term, materially better than BHP Billiton (BHP, Lighten).
However, given Rio Tinto is now largely ex growth, has fairly priced valuation
metrics and faces a challenging iron ore outlook, we maintain our Hold
recommendation. We raise our target price to $39 from $37.