Rio Tinto (NYSE:RIO) versus Reliance (NYSE:RS) Critical Contrast

Rio Tinto (NYSE:RIO) and Reliance (NYSE:RS) are both large-cap basic materials companies, but which is the better stock? We will contrast the two businesses based on the strength of their profitability, earnings, analyst recommendations, dividends, institutional ownership, valuation and risk.

Dividends

Rio Tinto pays an annual dividend of $2.95 per share and has a dividend yield of 4.6%. Reliance pays an annual dividend of $4.80 per share and has a dividend yield of 1.7%. Rio Tinto pays out 45.7% of its earnings in the form of a dividend. Reliance pays out 35.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Reliance has increased its dividend for 15 consecutive years.

Analyst Recommendations

This is a breakdown of current ratings for Rio Tinto and Reliance, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Rio Tinto	0	4	3	2	2.78
Reliance	0	4	3	0	2.43

Rio Tinto presently has a consensus target price of $73.00, indicating a potential upside of 14.68%. Reliance has a consensus target price of $328.80, indicating a potential upside of 15.37%. Given Reliance’s higher probable upside, analysts plainly believe Reliance is more favorable than Rio Tinto.

Volatility & Risk

Rio Tinto has a beta of 0.66, meaning that its stock price is 34% less volatile than the S&P 500. Comparatively, Reliance has a beta of 0.89, meaning that its stock price is 11% less volatile than the S&P 500.

Profitability

This table compares Rio Tinto and Reliance’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Rio Tinto	N/A	N/A	N/A
Reliance	5.39%	10.48%	7.37%

Institutional and Insider Ownership

19.3% of Rio Tinto shares are owned by institutional investors. Comparatively, 79.3% of Reliance shares are owned by institutional investors. 0.4% of Reliance shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Earnings & Valuation

This table compares Rio Tinto and Reliance”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Rio Tinto	$53.66 billion	1.49	$11.55 billion	$6.45	9.87
Reliance	$13.84 billion	1.08	$875.20 million	$13.70	20.80

Rio Tinto has higher revenue and earnings than Reliance. Rio Tinto is trading at a lower price-to-earnings ratio than Reliance, indicating that it is currently the more affordable of the two stocks.

Summary

Reliance beats Rio Tinto on 11 of the 17 factors compared between the two stocks.

About Rio Tinto

Rio Tinto Group engages in exploring, mining, and processing mineral resources worldwide. The company operates through Iron Ore, Aluminium, Copper, and Minerals Segments. The Iron Ore segment engages in the iron ore mining, and salt and gypsum production in Western Australia. The Aluminum segment is involved in bauxite mining; alumina refining; and aluminium smelting. The Copper segment engages in mining and refining of copper, gold, silver, molybdenum, and other by-products and exploration activities. The Minerals segment is involved in mining and processing of borates, titanium dioxide feedstock, and iron concentrate and pellets; diamond mining, sorting, and marketing; and development projects for battery materials, such as lithium. It also owns and operates open pit and underground mines; and refineries, smelters, processing plants and power, and shipping facilities. Rio Tinto Group was founded in 1873 and is headquartered in London, the United Kingdom.

About Reliance

Reliance, Inc. operates as a diversified metal solutions provider and the metals service center company in the United States, Canada, and internationally. The company distributes a line of approximately 100,000 metal products, including alloy, aluminum, brass, copper, carbon steel, stainless steel, titanium, and specialty steel products; and provides metals processing services to general manufacturing, non-residential construction, transportation, aerospace, energy, electronics and semiconductor fabrication, and heavy industries. It sells its products directly to original equipment manufacturers, which primarily include small machine shops and fabricators. The company was formerly known as Reliance Steel & Aluminum Co. and changed its name to Reliance, Inc. in February 2024. Reliance, Inc. was founded in 1939 and is based in Scottsdale, Arizona.