Rio Tinto (ASX: RIO) has a strong outlook with respect to cashflow and dividends, but iron ore price weakness is causing uncertainty

Rio Tinto (ASX: RIO) has a strong outlook with respect to cashflow and dividends, but iron ore price weakness is causing uncertainty. UBS said today in a research note that it is positive on Rio due to improving free cashflow and the potential for a ~$4bn buy-back during February 2015, but iron ore prices remain a key concern. UBS expects cashflow to improve materially during 2015/16 on lower capex/costs, and higher volumes. However the iron ore price, which has fallen by 30% in 2014 from $135/t to $95/t, is the major concern. The issue of earnings diversity is also a concern from our perspective, with 85% of Rio's earnings coming from iron ore (BHP around 50%).