staffordian wrote:I always have to look twice at these RIO announcements, which are a little confusing.
As far as I can see, RIO helpfully give a sterling dividend with the results announcement, rather than saying it will be determined closer to the payment date, but if holders elect to receive the payment in a different currency to the default, this is where the latest announcement is relevant.
Or something like that
The key to it is understanding
how Rio Tinto is being helpful. Each of the two companies will have
actually done the currency conversion they need to in order to have the right amount of the right currency to pay their declared dividends in the way that they say they will before announcing them. So Rio Tinto plc will already have done the required currency conversions to pay its declared dividend of 127 US cents per share in sterling before August 1st, and so will have
known then that they owned enough sterling to pay 96.82p per Rio Tinto plc share without any further currency conversion, and similarly Rio Tinto Limited will have done the required currency conversion to have
known then that they owned enough Australian dollars to pay 170.84 Australian cents per Rio Tinto Limited share.
So when shareholders elect to be paid in the 'wrong' currency, Rio Tinto plc is left with too much sterling and no Australian dollars reserved to pay its dividend in the currencies its shareholders actually want, and similarly Rio Tinto Limited is left with too many Australian dollars and no sterling reserved to pay its dividend in the currencies its shareholders actually want. Which they solve by doing a further currency conversion, and that's what yesterday's RNS is about. So what Rio Tinto are actually being helpful about is allowing shareholders in each company to elect to be paid in the 'wrong' currency for that company after the dividend has been announced, though such shareholders do take the extra currency risk - in the case of yesterday's announcement, sterling had strengthened against the Australian dollar between the two currency conversions, so that Rio Tinto plc shareholders who chose to be paid in Australian dollars were paid more Australian cents per share than Rio Tinto Limited shareholders who got paid by default in Australian dollars, and correspondingly Rio Tinto Limited shareholders who chose to be paid in sterling were paid fewer pence per share than Rio Tinto plc shareholders who got paid by default in sterling.
All rather messy, but
some mess is pretty inevitable for companies that give their shareholders a choice of what currency to be paid in (essentially because various reasonable wishes about it
cannot all be satisfied without the aid of a time machine...). Though for most HYPers, it should be very easy to avoid Rio Tinto's particular choice of which area the mess is in: just buy/hold Rio Tinto plc shares if you want to be paid in sterling, and Rio Tinto Limited shares if you want to be paid in Australian dollars. The exceptions are basically those whose currency wishes change over time, e.g. because they emigrate from one country to another.
Gengulphus
