Here's why the Rio Tinto (ASX:RIO) share price jumped 9% to a record high today

The Rio Tinto Limited (ASX:RIO) share price jumped 9% higher to a record high on Thursday. Here's why its shares are on fire…

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

It certainly was a stunning day of trade for the Rio Tinto Limited (ASX: RIO) share price on Thursday.

The mining giant's shares stormed as much as 9% higher to hit a record high of $126.18 before ending the day 8.5% higher at $125.66.

Also hitting new highs today were its rivals BHP Group Ltd (ASX: BHP) and Fortescue Metals Group Limited (ASX: FMG).

Why did the Rio Tinto share price rocket higher?

Investors were fighting to buy the company's shares on Thursday after the iron ore price continued its ascent following positive news out of the US.

The steel making ingredient and other commodities climbed higher after the Democrats won the Georgia Senate run-off. This effectively hands control of the Senate to the Democrats, paving the way for further stimulus to boost economic growth in the United States.

This in turn should underpin demand for many commodities and support the high prices that many are commanding.

How is the iron ore price performing?

The iron ore price rose a further 80 US cents or 0.5% overnight to hit US$167.95 a tonne. This bodes very well for Rio Tinto and its shareholders in FY 2021.

The mining giant is targeting Pilbara iron ore unit costs of US$14 to US$15 per tonne. This means it is operating with a margin of over US$150 a tonne at present.

And given the strength of its balance sheet, the sizeable free cash flow it is generating is likely to be returned to shareholders through dividends.

What dividend will Rio Tinto pay?

According to a recent note out of Macquarie, its analysts are expecting the company to pay shareholders a fully franked ~$8.84 per share dividend in FY 2021.

Based on the current Rio Tinto share price, this will mean a very generous 7% dividend yield over the next 12 months.

Motley Fool contributor James Mickleboro 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.

More on Share Market News

Stock market chart in green with a rising arrow symbolising a rising share price.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a massive day for the ASX 200, with a new all-time high recorded.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Technology Shares

This ASX tech stock rocketed 60% in March! Can it keep on delivering?

After soaring in March, the ASX tech stock is now up 169% since this time last year.

Read more »

Broker Notes

Brokers name 3 ASX shares to buy now

Here's why brokers are feeling bullish about these three shares this week.

Read more »

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Share Fallers

Why Burgundy Diamond Mines, Clarity Pharmaceuticals, EML, and Zip are sinking today

These ASX shares are ending the week in the red. But why?

Read more »

A young women pumps her fists in excitement after seeing some good news on her laptop.
Share Gainers

Why Mesoblast, Newmont, Pilbara Minerals, and Platinum shares are jumping

These ASX shares are ending the week strongly. But why?

Read more »

a young boy dressed up in a business suit and tie has a cute grin and holds two fingers up.
Opinions

2 of my top ASX 200 shares to consider buying before April

I would happily exchange dollars for these two shares right now.

Read more »

Father in the ocean with his daughters, symbolising passive income.
Dividend Investing

I'd spend $8k on these ASX 200 shares today to target a $6,102 annual passive income

I believe these ASX 200 shares will continue rewarding passive income investors for years to come.

Read more »

Three businesspeople leap high with the CBD in the background.
Share Market News

Boom! ASX 200 blasts to new record highs

ASX 200 investors just sent the benchmark index into uncharted territory.

Read more »