Why is the Rio Tinto share price tumbling into the red?

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

In morning trade, the mining giant’s shares are down almost 3% to $120.25.

Why is the Rio Tinto share price tumbling?

The weakness in the miner’s share price today is nothing to do with commodity prices or an operational update, nor is it due to a broker downgrade.

Instead, the Rio Tinto share price is falling today because of its dividend.

Today is the day that the company’s shares go ex-dividend. When this happens, it means that the rights to its next dividend payment have been finalised.

As a result, if you were to buy Rio Tinto shares today, you would own the shares but not receive the dividend on pay day. That dividend would instead find its way to the bank account of the seller of the shares even though they’re no longer in their portfolio.

As you would expect, investors don’t want to pay for something they won’t receive. This means that generally on ex-dividend day, a company’s share price will fall in line with the value of the dividend to reflect this.

How big is the Rio Tinto dividend?

When Rio Tinto released its full year results last month, it reported a 3% decline in revenue to US$54,041 million and a 9% fall in underlying EBITDA to US$23,892 million.

This led to the company declaring total fully franked dividends of US$4.20 per share for FY 2023, which was down 12% year on year. This comprises a US$1.62 per share interim dividend and a US$2.58 per share final dividend.

It is the latter dividend, which equates to A$3.92 per share in local currency, that the company’s shares are going ex-dividend for this morning.

Based on where the Rio Tinto share price ended yesterday’s session, this final dividend alone represents a generous 3.2% dividend yield.

Eligible shareholders can now look forward to receiving this dividend next month on 18 April.

The post Why is the Rio Tinto share price tumbling into the red? appeared first on The Motley Fool Australia.

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More reading

• Forget Westpac and buy these ASX dividend shares
• 5 things to watch on the ASX 200 on Tuesday
• Want to bank the Rio Tinto dividend? You’ll need to be fast!
• 34 ASX 200 shares with ex-dividend dates next week
• One ASX mining sector at risk of more pain, and one ready to soar!

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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