Looking for income? Here are 2 FTSE 100 dividend stocks I’d buy and hold forever in an ISA

Harvey Jones picks out two high-yielding FTSE 100 (INDEXFTSE:UKX) giants trading at temptingly low valuations.

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Mining stocks are notoriously cyclical. When the global economy is booming, and countries are hungry for raw materials, their share prices can fly. In a downturn, they can crash.

Given all the economic uncertainty this year, in particular the US-China trade war, their share prices have held up reasonably well. China is the world’s biggest consumer of metals and minerals, taking as much as 60% of production, and if that country’s growth story slows, it will hurt.

Yet the following two FTSE 100 giants both look nicely valued and offer juicy yields. Despite today’s market caution, both look solid buy-and-holds for those who want to up their exposure to this sector.

Rio Tinto

With a market-cap of £67bn, Rio Tinto (LSE: RIO) is a real giant. Its operations stretch across Australia, Brazil, Guinea, Canada, Mongolia, the United States, Chile, Indonesia and beyond. Iron ore, aluminium, copper, diamonds, bauxite, coal and uranium are just some of the metals and minerals it discovers, mines and processes.

Its share price has dipped 18% over the last three months, which could suggest a buying opportunity, as the Rio Tinto share price now trades at just 8.3 times forward earnings, well below the average of 17.7 times for the index as a whole.

This morning, its third quarter operational update showed a 5% rise in iron ore shipments to 86.1m tonnes, compared to the same period last year, as it recovered from operational and weather challenges experienced earlier in the year.”

The iron ore price surged by as much as 60% earlier this year, due to supply disruptions caused by a Brazilian dam disaster and tropical cyclones in Western Australia, which also hit Rio’s own shipments. The price peaked at $120 a tonne in June but has now slipped to $89 as major Brazilian exporter Vale has ramped up production again. Demand from China is also slowing as the government clamps down on steel mills in a bid to reduce pollution.

The US-China trade war remains some way from resolution, while the global economy continues to slow. However, if you waited for the perfect time to buy a stock like this, you might never part with your money. Today’s low valuation, and whopping forecast yield of 8.6% (covered 1.5 times), are hard to resist.

Anglo American

Fellow FTSE 100 miner Anglo American (LSE: AAL) also saw its share price drop lately, falling around 13% in the last three months. 

The £26bn South Africa-focused group mines diamonds (through De Beers), copper, platinum, iron ore, coal and nickel, but its July production report was disappointing, with diamond, coal, palladium, manganese and platinum production all falling, and only nickel and copper rising (and then only slightly).

Earlier this month, management reported a rise in rough diamond sales in its eighth cycle of the year, but they’re still significantly down on last year.

The Anglo American share price is also at a temptingly low valuation of 8.3 times forward earnings, with a forecast 5% yield nicely covered 2.4 times. The road ahead could be bumpy, with earnings expected to rise 14% this year, but fall 10% next.

Mining stocks could all be in for a rough ride if the global economy does slow. However, given today’s valuations and yields, they remain hard to ignore.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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