2019 certainly was a great year for the Rio Tinto Limited (ASX: RIO) share price.
During the 12 months the mining giant's shares recorded a gain of 34% excluding dividends.
This means Rio Tinto's shares outperformed the S&P/ASX 200 index, which recorded a gain of just over 20% in 2019. This also excludes dividends.
Why did the Rio Tinto share price race higher in 2019?
One of the main catalysts for Rio Tinto's strong share price gain in 2019 was a rise in the iron ore price.
Due to strong demand from Chinese steel makers and supply disruptions in Australia and Brazil, which are the two biggest iron ore producers globally, iron ore prices rocketed higher last year.
Given how iron ore contributes strongly to Rio Tinto's overall sales, this underpinned bumper profits and cash flows during the first half of FY 2019.
During the half Rio Tinto recorded underlying EBITDA of US$10.3 billion, which was an 11% increase on the prior corresponding period. Its cash flow from operations grew even quicker. They lifted 39% to US$7.2 billion, leading to total free cash flow of US$4.7 billion during the half.
Dividends, dividends, dividends.
Another driver of its strong share price gain was management's decision to return significant funds to its shareholders.
During the half, Rio Tinto revealed cash returns of US$3.5 billion. This comprised a record interim ordinary dividend of US$2.5 billion, equivalent to 151 US cents per share, and a special dividend of US$1 billion, equivalent to 61 US cents per share.
To put that in context, based on current exchange rates and today's share price, this equates to a fully franked 3.1% dividend yield. And combined with its final dividend from FY 2018, the 12-month trailing dividend yield increases to a massive ~9% fully franked.
Given how low interest rates have fallen and how difficult it is for income investors to generate sufficient income from term deposits and savings accounts, I don't believe it is surprising to see its shares race higher.
For the same reasons, rival BHP Group Ltd (ASX: BHP) and Fortescue Metals Group Limited (ASX: FMG) also launched notably higher last year.
