Record $2bn interim dividend doesn't help Rio Tinto's share price

Courtney Goldsmith
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A worker helps conduct a 'pour' during a
Rio Tinto set a record half-year dividend for shareholders (Source: Getty)

Rio Tinto's share price fell today after the global miner's first-half earnings came in slightly below analyst expectations.

However, the company revealed $3bn (£2.3bn) in total cash returns to shareholders with a record half-year dividend of $1.10 a share, equal to $2bn, and $1bn in share buybacks.

The figures

Higher-than-average commodity prices pushed up Rio's consolidated sales for the six months to the end of June to $19.3bn, $3.8bn higher than the previous year, while pre-tax profit increased to $6.2bn from $2.3bn in 2016.

Although underlying earnings of $3.94bn were more than double the $1.56bn made in the first half of last year, Rio missed analyst forecasts of $4.19bn, according to Thomson Reuters.

Shares in the global miner fell 3.49 per cent in late afternoon trading to 3,387.5p.

Read more: Rio shares fall as it cuts iron ore guidance on bad weather and rail works

Why it's interesting

Rising demand for iron ore in China, the world's top commodity buyer, helped boost Rio Tinto's first-half figures, but analysts had expected the recovery in commodity prices push Rio's profits and revenues even higher.

Rio rewarded shareholders with a record dividend and an increased share buyback, which together represent 75 per cent of underlying earnings for the first half of 2017, but Yuen Low, mining analyst at Shore Capital Markets would have preferred to see a higher dividend instead of an increased buyback.

In the second half, Rio will gain another $2.45bn in cash from the sale of its Coal & Allied unit in Australia to China's Yancoal.

Tyler Broda, analyst at RBC Capital Markets, said:

Today’s results should act as another signal of the mining industry’s ability to pay out strong and growing dividends and should help to tighten valuations in what we continue to see as a strong value opportunity.

What Rio Tinto said

Rio Tinto chief executive Jean-Sebastien Jacques said:

We are now shifting gear to focus on the untapped value from our productivity programme and continue to strengthen our portfolio to build higher returns for the future.

We announced the sale of our thermal coal business in Australia for $2.7bn and are making good progress on our compelling growth projects - Oyu Tolgoi, Amrun and Silvergrass.

Read more: UK authorities open corruption probe into Rio Tinto Guinea conduct

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