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Global miner Rio Tinto on Wednesday reported its first-half profit more than doubled from a year earlier following a rebound in iron ore prices and announced an additional $1 billion share buyback.
Underlying earnings for the six months to June 30 rose to $3.94 billion from $1.56 billion a year earlier, missing Thomson Reuters analysts' forecast of $4.19 billion. The stock dipped 2.2 percent in early deals Wednesday as investors moved to take stock of the company's new payout policy.
Rio Tinto is to return $3 billion to shareholders: $2 billion on the dividend side and $1 billion of share buybacks.
Speaking to CNBC Wednesday, Rio Tinto's Chief Executive Jean-Sebastien Jacques lauded the company's half-year dividend, which rose from 45 cents a share in 2016 to 110 cents a year this year.
"We have performed very well in a very uncertain and very volatile environment," Jacques noted.
"The $2 billion of dividend is the highest interim dividend in the history of Rio Tinto."
The returns come after a shift in Rio Tinto's payout policy, which did away with its "progressive dividend" program in early 2016 after suffering its worst earnings in over a decade. The old policy saw investors receive guaranteed dividend payments but the business had to re-evaluate to better reflect volatile commodity cycles, which suffered significant falls in 2015.
However, Jacques insisted that the new system allows investors to see greater benefits at times of strong performance.
"If we had stuck to the previous dividend that we had a couple of years ago our shareholders today would not enjoy these kinds of returns," Jacques said. "The new policy, which is to say that at the top of cycles shareholders will benefit from stronger cash flows, is implemented today."
The company has outlined a longer-term dividend range of 40-60 percent of underlying earnings in aggregate throughout the cycle.
Jacques added that further payouts could come "down the track" after the company closes its $2.45 billion sale of Coal & Allied, estimated for the third quarter of 2017.
"When we have the cash on the balance sheet we will go through the capital allocation cycle and we will decide as a board what we do with the cash between investing in the long-term, cash returns for shareholders and the strength of the balance sheet," he said.
- Reuters contributed to this report