This mining giant is deep in the red today…
The post Why the Rio Tinto (ASX:RIO) share price is down 7% today appeared first on The Motley Fool Australia. –
In afternoon trade, the mining giant’s shares are down 7% to $120.35.
Why is the Rio Tinto share price sinking?
The good news for shareholders is that the decline in the Rio Tinto share price has nothing to do with commodity prices or anything operational.
Rather, today’s decline has been driven almost entirely by the fact that the mining giant’s shares are trading ex-dividend today.
When a share trades ex-dividend, it means it is trading without the rights to an upcoming dividend payment.
As result, this morning the company’s share price dropped to reflect the fact that new buyers will not be receiving its upcoming dividend.
The Rio Tinto dividend
Eligible Rio Tinto shareholders can now look forward to receiving the company’s interim and special dividends next month on 23 September.
The mining giant is paying its shareholders fully franked dividends totalling 760.06 cents per share. This comprises an interim dividend of 509.42 cents per share and a special dividend of 250.64 cents per share.
As a comparison, the Rio Tinto share price has fallen 879 cents today. This means that 86% of this decline is attributable to the dividends that will be paid.
What about the rest?
The rest of the weakness in the Rio Tinto share price is likely to be due to profit taking from investors.
With Rio Tinto shares up strongly over the last 12 months, some investors may be cashing in now that they have locked in this bumper dividend.
Though, if analysts at Macquarie are on the money, it might be a little too soon to do that.
At the end of last month the broker put an outperform rating and $162.00 price target on its shares. This implies potential upside of almost 35% over the next 12 months.
Should you invest $1,000 in Rio Tinto right now?
Before you consider Rio Tinto, you’ll want to hear this.
Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Rio Tinto wasn’t one of them.
The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.
*Returns as of May 24th 2021
Is the Rio Tinto (ASX:RIO) share price a buy right now?
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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 Bruce Jackson.