BIGGEST IRON ORE MINERS ARE EXPECTED TO SLASH DIVIDENDS

Australia's biggest iron ore miners are expected to slash dividends next month as the price of the steelmaking commodity dropped to $US40 a tonne overnight.

Further price falls are expected this year as Pilbara miners BHP Billiton, Rio Tinto and Fortescue Metals Group continue to boost production amid weak Chinese steel demand and a global oversupply.

Analysts say a suitable cash return for investors in the current commodity price environment would be around four to five per cent, rather than the 11 per cent paid by BHP and 7.5 per cent offered by Rio.

CMC Markets analyst Michael McCarthy predicts BHP and Rio will cut their dividends when they report their financial results in February.

“In cutting the dividend and moving it back to reflect the commodities cycle, BHP would be normalising its dividend policy,” Mr McCarthy said.

“I would suggest Rio is likely to cut too.”