The talk of the S&P/ASX 200 Index (ASX: XJO) watercooler this week has centred around Rio Tinto Limited (ASX: RIO) and the monster US$9.1 billion dividend that the miner announced on Wednesday.
ASX mining shares have been among the standout ASX 200 performers in 2021 so far, but this week has taken miners to the next level.
The Rio dividend announcement has seen the Rio share price rise by more than 3% since the news was released.
This has culminated in the Rio share price hitting a new all-time high of $136.90 a share just today. As has its arch-rival BHP Group Ltd (ASX: BHP), which hit $54.55 a share this morning.
So what is so good about this Rio dividend that it has seemingly played a large role in the company's new high watermark today? Well, when it comes to dividends, it seems size does matter.
Rio Tinto's share price boosted by monster dividend
The new Rio dividend comes in at a record US$9.1 billion. Rio will be paying an interim dividend of US$3.76 per share, as well as a special dividend of US$1.85 a share, on 23 September. That equates to US$5.61 a share (or AU$7.60 with today's exchange rate).
Just to put into context how large this dividend is, a reminder of Rio's previous payout. That one was a final and special dividend combination and amounted to a total of US$4.69 a share.
Before that, the last interim Rio dividend came to US$1.55 a share. In other words, this new dividend is a 143% increase from last year's interim dividend. Yowza.
So, how much is this new Rio dividend worth in terms of yield?
Well, if we combine this newly announced payout with Rio's last final dividend (excluding the specials), we get a figure of US$6.85 ($9.27). That would equate to a yield of 6.85%. If we include the special dividends, we get to 7.61%.
And, just for kicks, let's annualise Rio's upcoming dividend and see what we find.
So, if we assume Rio pays out exactly the same dividend as it will in September for its following dividend payment, we would get a hypothetical forward yield of 8.28%. With Rio's full franking credits, this would gross up to a whopping 11.83%.
No wonder investors are scrambling to get hold of Rio Tinto shares right now.
At the current Rio Tinto share price, the company has a market capitalisation of $50 billion, a price-to-earnings (P/E) ratio of 8.62 and a trailing dividend yield of 4.55%.
