One FTSE 100 dividend stock I'd buy more of today

Copper mine open cast pit

Shares of Anglo-Australian mining giant Rio Tinto (LSE: RIO) have climbed 43% over the last 12 months, dwarfing the 9% gain delivered by the FTSE 100 over the same period.

However, I believe this impressive performance needs to be kept in context. The shares have only risen by 23% over the last five years (FTSE 100: +31%) and are worth 18% less than 10 years ago (FTSE 100: +16%).

These share price movements highlight the cyclical nature of the mining business. So it's important to consider what stage of this cycle we're currently at. Opinions vary, but my view is that we're somewhere in the middle. I believe well-run companies with low-cost mines should be able to continue generating attractive returns for some time to come.

Strong performance

Tuesday's third-quarter production figures from Rio Tinto seem to confirm this view. The group's new automated rail system helped to increase iron ore shipments by 6%, compared to the same period last year. Bauxite production rose by 4%, while coking coal was 3% higher.

The only downbeat remarks related to copper production, where various delays mean that guidance for full-year copper output is between 460 and 480 thousand tonnes, down from 500 to 550 thousand tonnes.

Tempting shareholder returns

Rio Tinto has announced plans to return more than $8bn to shareholders so far this year. And recent press reports suggest to me that the group's focus on selling non-core assets could result in further returns. Among the potential candidates for disposal are its remaining coal operations and part of its aluminium business.

The stock currently trades at 2.1 times book value, which isn't obviously cheap. But the current £37 share price is equivalent to just 11 times trailing free cash flow. There's also a well-covered forecast dividend yield of 5.4%. I'm holding on for more.

Sales up 34%

Another cyclical business performing strongly this year is small-cap Flowtech Fluidpower (LSE: FLO). This AIM-listed company specialises in supplying "technical fluid power products," such as parts for hydraulic systems.

The group's sales rose by 34% to £54.5m during the nine months to 30 September. Of this growth, 12.4% was organic, meaning that it came from existing businesses. The remainder came from acquisitions.

Flowtech's shares have risen by 34% so far this year, compared to a gain of 22% for the AIM market as a whole. Tuesday's update confirmed that management expects full-year results to be in line with expectations.

This suggests that earnings per share should climb 23% to 13.5p this year, putting the stock on a forecast P/E of 12.5. Dividend growth is expected to be about 5%, giving a prospective yield of 3.5%.

Still a buy?

In my view, this valuation still looks attractive, given the group's solid fundamentals. Net gearing was just 12% at the end of June, and the dividend has been consistently covered by free cash flow since the firm's flotation in 2014.

Strong sales growth and stable profit margins suggest the shares could have further to go. I continue to rate these shares as a buy.

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Roland Head owns shares of Rio Tinto. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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