Why is the Rio Tinto share price tumbling 4% on Thursday?

Female worker sitting desk with head in hand and looking fed up

Female worker sitting desk with head in hand and looking fed up

The Rio Tinto Ltd (ASX: RIO) share price is having a tough time on Thursday morning.

At the time of writing, the mining giant’s shares are down 4% to $120.00.

Why is the Rio Tinto share price falling?

The reason that Rio Tinto’s shares are falling on Thursday is that they are one of ten ASX 200 shares going ex-dividend this morning.

When a share trades ex-dividend, it means that the rights to an upcoming dividend payment are now settled and new buyers won’t be entitled to receive this payout.

As you would expect, investors aren’t willing to pay for a dividend they won’t receive, so a company’s share price will invariably drop to reflect this.

This has been the case with the Rio Tinto share price today.

Rio Tinto dividend

Last month, Rio Tinto released its full-year results and reported a 13% decline in revenue to US$55,554 million and a 41% reduction in net profit after tax to US$12,420 million.

Management advised that this profit decline reflects weaker commodity prices, the impact of higher energy and raw materials prices on its operations, and higher rates of inflation on operating costs and closure liabilities. Something which we have seen across most miners with iron ore exposure.

In light of its softer profits, the Rio Tinto board was forced to cut its fully franked final dividend. It reduced it by 46% over the prior corresponding period to US$2.25 or A$3.265 per share.

Today, the miner’s shares have traded ex-dividend for this, which means that it won’t be too long until eligible shareholders receive this dividend. Rio Tinto is planning to pay this dividend next month on 20 April.

The post Why is the Rio Tinto share price tumbling 4% on Thursday? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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