Why the Rio Tinto (ASX:RIO) share price is down 7% today

This mining giant is deep in the red today…

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The Rio Tinto Limited (ASX: RIO) share price has been the worst performer on the S&P/ASX 200 Index (ASX: XJO) on Thursday.

In afternoon trade, the mining giant's shares are down 7% to $120.35.

Why is the Rio Tinto share price sinking?

The good news for shareholders is that the decline in the Rio Tinto share price has nothing to do with commodity prices or anything operational.

Rather, today's decline has been driven almost entirely by the fact that the mining giant's shares are trading ex-dividend today.

When a share trades ex-dividend, it means it is trading without the rights to an upcoming dividend payment.

As result, this morning the company's share price dropped to reflect the fact that new buyers will not be receiving its upcoming dividend.

The Rio Tinto dividend

Eligible Rio Tinto shareholders can now look forward to receiving the company's interim and special dividends next month on 23 September.

The mining giant is paying its shareholders fully franked dividends totalling 760.06 cents per share. This comprises an interim dividend of 509.42 cents per share and a special dividend of 250.64 cents per share.

As a comparison, the Rio Tinto share price has fallen 879 cents today. This means that 86% of this decline is attributable to the dividends that will be paid.

What about the rest?

The rest of the weakness in the Rio Tinto share price is likely to be due to profit taking from investors.

With Rio Tinto shares up strongly over the last 12 months, some investors may be cashing in now that they have locked in this bumper dividend.

Though, if analysts at Macquarie are on the money, it might be a little too soon to do that.

At the end of last month the broker put an outperform rating and $162.00 price target on its shares. This implies potential upside of almost 35% over the next 12 months.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. 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.

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