The Rio Tinto Ltd (ASX: RIO) share price managed to beat the S&P/ASX 200 Index (ASX: XJO) over the month of September. The ASX 200 dropped by 3.5%, while Rio Tinto shares climbed by 0.6% – that's an outperformance of around 4%!
Rio Tinto is one of the largest miners in the world, with exposure to commodities like iron ore, copper, lithium, aluminium and more.
There was plenty going on during September, but for Rio Tinto, I'll talk about two specific things.
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Payment of the Rio Tinto dividend
The large ASX iron ore shares typically provide a substantial amount of shareholder returns in the form of dividends. That's due to the relatively generous dividend payout ratio as well as the fairly low price/earnings (P/E) ratio.
Rio Tinto shares went ex-dividend in August, but it paid the dividend to investors in September.
The ASX mining share said that the dividend in Australian dollar terms was A$2.61 per share. At the current Rio Tinto share price, that represents a fully franked dividend yield of 2.3% or 3.3% when grossed up for franking credits.
Some shareholders may have decided to take part in the dividend re-investment plan (DRP). Rio Tinto said that shares will be purchased on the market, "or as soon as practicable after the dividend payment date".
With the dividend payment date being 21 September 2023, it means there was more buying of shares toward the end of the month, which is theoretically supportive for the Rio Tinto share price at that point.
Solid iron ore price
A key factor for Rio Tinto's profitability is how much revenue it receives for its commodities.
Mining costs don't typically change much month to month, so extra revenue for the same production is largely extra profit.
The iron ore price has remained stronger than some analysts were expecting. That could explain why the Rio Tinto share price outperformed.
According to Trading Economics, the iron ore price stayed above US$115 per tonne for the whole month and went up by around US$2 per tonne to approximately US$119.50 per tonne.
At that price, Rio Tinto is able to make good profit and cash flow each month, enabling it to pay appealing dividends and invest in its operations, while maintaining a good balance sheet.
Anything could happen next for Rio Tinto, including a possible decline of the iron ore price, particularly when it comes to the unpredictability of the Chinese economy and how volatile iron and steel demand can be.
Rio Tinto share price snapshot
Since the start of 2023, Rio Tinto shares have fallen around 2%, while the ASX 200 is slightly in the red, down less than 1%.
