The world’s major natural resources plays remain a lukewarm pick for stock investors, as fears over the state of the global economy — and consequently commodities demand — drag on.
But with production across key markets slowing due to persistently-weak prices, it could be argued that the risks oscillating across the mining sector are currently baked into the share prices of many of the top-notch earth diggers.
With this in mind, I am looking at whether diversified mining giants Rio Tinto (LSE: RIO), Anglo American (LSE: AAL) and Glencore (LSE: GLEN) may provide plenty of bang for your buck at current prices.
Rio Tinto
At Rio Tinto, the effect of persistent commodity price weakness is expected to push earnings 12% lower this year, to 486.7 US cents per share, and a further 5% slide in 2015 to 462.4 cents.
Still, projections leave the business dealing on P/E ratings of 9.6 times and 10.1 times prospective earnings for 2014 and 2015 respectively — any reading of 10 times or below is widely considered stupendous value.
On top of this, Rio Tinto’s drive to develop only the most profitable assets, including shedding non-core projects and scaling back capital expenditure, is also allowing it to boost the balance sheet and reward shareholders through its progressive dividend policy.
Indeed, the firm is due to lift the full-year payout 9% to 209 US cents per share this year, and an extra 7% advance — to 223 cents — is anticipated for 2015. As a consequence Rio Tinto carries monster yields of 4.4% and 4.7% for 2014 and 2015 correspondingly, trashing a forward average of 3.2% for the complete mining sector.
Anglo American
Enduring revenues pressures at Anglo American are anticipated to result in a third successive annual earnings dip at the firm, with the mining colossus anticipated to punch a 20% decline to 167.2 US cents per share. However, the benefit of rising diamond prices, combined with a gradual production ramp-up at its Minas-Rio iron ore project, are expected to help push earnings 8% higher in 2015 to 180.6 cents.
Such forecasts leave Anglo American changing hands on an attractive P/E multiple of just 12.7 times for 2014, and which slips to 11.7 times for 2015.
And although Anglo American is widely expected to keep the full-year dividend on hold at around 85 cents per share this year and next, these figures produce a sector-smashing yield of 4%.
Glencore
Due to Glencore’s terrific diversification across a multitude of commodities markets, not to mention the breakneck progress of its asset-shedding programme, the City’s number crunchers expect the business to bounce back into the black from this year onwards.
Earnings at the company are predicted to edge 3% higher in the current 12-month period, to 34 US cents per share. And the bottom line is predicted to stampede higher in 2015, with a hefty 34% advance currently pencilled in to 45.6 cents.
Subsequently Glencore currently changes hands on a reasonable if unspectacular P/E rating of 15.3 times for 2014. However, next year’s stratospheric rise drives this to a lip-smacking 11.4 times.
In light of these spritely earnings projections, Glencore is expected to lift the full-year dividend 5% this year to 17.3 cents per share. And a further 12% increase, to 19.4 cents, is chalked in for 2015. Consequently a tasty 3.3% yield for 2014 surges to 3.7% for the forthcoming year.
