When calculating how much second income an investment pays out, there’s a few ways to look at it.
Many investors count just the dividends as income, even if the stock made notable capital gains. That’s because cashing out any stock gains would deplete the number of shares held.
Still, since you could technically cash out any time and still hold the equivalent value invested, it’s fair to consider the total return as income.
For example, Rio Tinto (LSE: RIO) isn’t the highest-yielding on the FTSE 100, at around 4.2%. But the share price is up almost 66% in the past year to £71.60.
That equates to a meaty total annual return of around 70%.
So, 1,000 shares bought a year ago when the price was £42.45 would have cost £42,450. Today, that same investment would have grown to around £75,348, with dividends included.
That’s a mind-blowing £32,898 that could be withdrawn as a ‘second income’.
Let’s see how Rio Tinto got here.
Solid mining demand
Mining has been one of the strongest sectors over the past year, and Rio Tinto has benefited from that backdrop. Copper now makes up about 30% of Rio Tinto’s earnings, while iron ore has slipped to around 60% of the group total.
That’s key to the growth narrative, because copper is linked to electrification, power grids, and data centres — all of which support demand.
But Lithium is an even bigger part of the story. Rio Tinto’s Jérôme Pécresse said: “Lithium demand in the next two years is going to be much more balanced between EVs and energy storage.”
That’s encouraging, pointing to a wider market than just electric cars. Rio’s latest annual results also showed underlying EBITDA of $25.4bn and a stronger operating cash flow, which helps support the dividend.
In summary:
- Copper has become a bigger earnings driver.
- Lithium could add another growth leg.
- The dividend remains backed by strong cash generation.
Risks to watch
Growth aside, I wouldn’t ignore the warning signs. Some market commentators think the mining rally may be losing steam, and RBC Capital Markets downgraded Rio Tinto to Underperform from Sector Perform on 2 June 2026. At the same time, the broker altered its price target to £64, which suggests caution rather than enthusiasm.
There is also a broader valuation risk. Rio has already had a strong run, so expectations are higher now than they were a year ago. If iron ore weakens or China demand disappoints, the share price can move quickly in the wrong direction.
That’s why mining stocks can be rewarding, but they are rarely calm.
The bottom line
For me, Rio Tinto shows how a dividend stock can become a big second-income winner when capital gains join the payout. However, it’s generally considered best practice to reinvest any dividend gains and compound them over the long term.
Rio had a good run but it’s still a cyclical miner, not a sleepy income utility. As such, I would only consider it as a small position in a diversified portfolio, where it can boost returns without taking over the whole plan.
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Mark Hartley does not hold any positions in the companies mentioned.
