BHP vs Rio Tinto – Which is the better investment?

BHP Group (ASX: BHP) and Rio Tinto (RIO) – Which One Should You Buy

Australia has long been known as “the lucky country” due to our abundance of the natural resources needed for the rest of the twenty first century and beyond.

The ASX has some of the best mining companies in the world, key among them the two largest by market capitalisation: BHP Group with a market cap of $266 billion, and Rio Tinto with a market cap of $232billion. Aussie investors are lucky to have easy access to both on the ASX, but which represents the better investment right now?

If you are looking for answers from the analyst community, you will find little help. The consensus from 15 analysts on BHP is Hold, whilst for RIO it is buy.

For a clearer answer, we need to dig into the metrics many investors consistently rely on to make investment decisions, like share price appreciation, financial performance, and dividend payments along with the most common valuation ratios dividing overvalued and undervalued stocks. These are quantitative and vary over time, with some valuation ratios requiring “here and now’” analysis while historical financial performance, share price movements, and dividend payments over time are also valid concerns.

In addition there are qualitative comparisons, beginning with what do each of them mine right now, and how do they see the future.

While both are vertically integrated and mine diverse commodities, there are some differentiations between them. Both have shed their thermal coal assets, but BHP still mines, processes, and sells metallurgical coal used in steel making. Iron ore is the largest commodity produced from each. The differences emerge on how they are preparing for the future.

Both are global mining majors, both generate huge cash flows from iron ore, and both are trying to tilt more of the portfolio toward future-facing commodities. But the investment cases are no longer identical, with BHP leaning harder into copper and potash, while Rio is growing in iron ore, copper and now lithium, helped by the Arcadium acquisition and the ongoing ramp in Oyu Tolgoi and Simandou.

Both have acknowledged the need for resources vital to a world hurtling towards more digitisation in the midst of a battle for produce cleaner energy.

Australia maintains a list of minerals critical for our “modern technologies, economies, and national security.” BHP currently mines two minerals on the list in molybdenum and nickel.

Along with iron ore, copper, and borates, Rio mines five minerals from the list; alumina, lithium, titanium, scandium, tellurium, along with diamonds, salt, and ferrous metals.

To begin answering the question of which is the better investment as we enter the second quarter of 2026, we will compare the financial performance of the two companies.

BHP Financial Performance

Source: ASX

Although revenues dropped, BHP’s net profit rose 14% on record production of both copper and iron ore, despite lower prices for iron ore and coal. However, underlying net profit attributable to shareholders fell 26.4%.

Now let us look at RIO’s Full Year 2024 results and the company’s Half Year 2025 results.

Rio Tinto Financial Performance

Source: ASX

Although there are differences between commodities mined, both Rio and BHP derive the majority of their revenue from iron ore. In the face of lower iron ore prices, Rio’s FY 2024 net profit rose 14.9%. Half Year 2025 results saw a 22% drop in profit attributable to owners of Rio Tinto, and the company elected to cut its dividend payment by 16%.

Share Price Appreciation

Despite facing the same challenging economic conditions of late with geopolitical volatility, Rio’s year-over-year share price has managed to jump 45% while BHP has added 37%.

Over five years BHP shares is up 29.3% while RIO is up 49% following a recent acceleration into the end of Q1.

Over ten years the Rio share price appreciation again tops BHP, up 141.8% compared to BHP’s 103.3%

Source: ASX

Dividend Payments

Rio’s five-year average total dividend yield is 6.13%BHP’s five-year average total dividend yield is 6.17%. Neither company cut dividends in the first year of COVID but both cut dividends in FY 2023. Rio reduced its FY 2022 dividend payment of $6.86 per share to $3.93 per share with the current dividend payment at $5.93. BHP cut its FY 2022 dividend payment from $3.29 per share to $1.74 per share with the current payment at $1.71 per share.

Experienced dividend investors pay attention to a company’s payout ratio, with lower values leaving the company more flexibility in maintaining dividends. Rio’s five year average payout ratio is 66.21% while BHP’s is 88.69.

If the goal is dependable miner income, both companies still screen well, but BHP looks a touch cleaner. BHP’s current live dividend yield is 2.64% versus 2.49% for Rio, and BHP continues to emphasise balancing growth investment with shareholder returns. Rio’s dividend framework targets total cash returns of 40% to 60% of underlying earnings through the cycle, while BHP reported a 55% FY2025 payout and a 60% interim payout for H1 FY2026. Rio is still a major dividend payer, but BHP currently looks a little more straightforward

Valuation Ratios: the Price Multiples

Of all the valuation ratios used to assess an investment, the price multiples are the simplest to understand and the most common among ordinary investors. These ratios compare the current share price of a stock to various financial metrics, with low ratios indicators of potentially undervalued stocks and high ratios indicators of potentially overvalued or high growth stocks.

The P/E, or price to earnings ratio is a favourite of retail investors. The ratio is calculated by dividing the current share price by the earnings per share, either from the prior fiscal year or on a trailing twelve-month basis. High P/E ratios indicate an investor may be paying too much for the stock.

Most valuation ratios need a point of comparison, or a benchmark index. For ASX stocks in the materials sector in which both BHP and RIO are classified, the index P/E is 20.48. BHP has a five year average P/E of 12.67 while the current P/E is 14.68.   Rio has a five year average P/E of 9.91 while the current P/E is 12.12. .

Bargain stocks generally have P/Es under 10.0 although some value investors accept 15.0 as a benchmark for undervaluation.

The Price to Book ratio (P/B) compares the current stock price against the value of the company’s assets per share. A ratio under 1.0 is a rare bargain.

The benchmark P/B for the materials sector is 2.41. Rio’s current P/B is 2.14 with a five year average P/B of 2.46. BHP’s current P/B is 2.90 with a five year average P/B of 3.90.

The price to cash flow (P/CF) compares the current share price to the company’s cash flow per share. The benchmark index P/CF is 10.99. Rio’s current  P/CF is 7.88 with a five year average of 6.75. BHP’s current P/CF is  i7.27 with a five year average P/CF of 6.56.

The Price to Forward Earnings ratio and the Price to Expected Growth ratio (P/EG) do not have a benchmark index since the denominator – forward earnings per share or earnings growth – are company specific forecasts from industry specific analysts. A P/EG under 1.0 represents a bargain stock.

In both cases the ratios tell investors how much they are paying for future earnings per share or future earnings growth. Five-year averages tend to smooth out economic downturns.

Rio has a five-year average price to forward earnings ratio of 9.70 and a five year average price to earnings growth ration of 0.13. BHP has a five-year average price to forward earnings ratio of 10.97 and a five-year average price to earnings growth ration of 0.70.

In a country with natural resources aplenty, it should come as no surprise that Australia’s top two ASX listed mining companies in BHP Group and Rio Tinto rank first and second in the world based on market capitalisation.

Australian investors have easy access to both through local brokerage outlets, but which one is the better investment right now?

BHP has streamlined its operations in an effort to focus on the minerals most crucial for a changing world. Rio Tinto has a broader base of commodities mined, including more of minerals deemed crucial by the Australian government.

Rio has a better historical track record in both financial performance and share price appreciation along with superior valuation ratios in most cases.

In Closing

If you are looking for a simple breakdown, we have tried to be as to the point as possible below, cutting through some of the detail and getting down to what really differentiates BHP vs Rio Tinto.

BHP looks stronger on pure quality metrics right now. It has the lower earnings multiple, slightly higher dividend yield, higher EBITDA, stronger margins, and materially better return on equity on the EODHD figures. It also enters 2026 with management explicitly emphasising operational discipline and growth in copper and potash, with copper now contributing more than half of group EBITDA in the first half of FY2026.

Rio Tinto looks more like the “portfolio transformation” story. Operationally, Rio’s 2025 results were supported by stronger copper and aluminium contributions, completion of the Oyu Tolgoi underground development, first ore shipment from Simandou, and the Arcadium acquisition, which made Rio a much larger player in lithium. That gives Rio more moving parts and arguably more strategic upside, but also more project-delivery complexity than BHP.

BHP is cheaper on earnings at 17.9x P/E versus 18.8x for Rio, while also delivering the stronger ROE and better earnings growth. That combination makes BHP look better value on the surface. Rio’s counterargument is that you may be paying for more strategic upside because the current portfolio is changing faster

Rio’s growth mix is broader: copper through Oyu Tolgoi, iron ore through Simandou, and lithium through Arcadium and related projects. That gives Rio more upside levers, but it also means more dependence on several big projects and more capital allocation complexity.