From high inflation and wars to concerns about China’s economy, there’s a veritable laundry list of worries for investors right now. And this is reflected in low share prices and high yields.
These global issues are undoubtedly troubling. And if I were wanting to park my money somewhere for just the next couple of months, I’d certainly think twice about stocks. There could be more volatility ahead.
However, as someone who is investing for retirement, there has rarely been a better time than today to increase my future passive income from UK stocks. A fair few have even started yielding double-digits!
One of my go-to income stocks is BlackRock World Mining Trust (LSE: BRWM). Here’s why I’d buy more shares in a heartbeat.
A diversified portfolio
As the name suggests, this FTSE 250 trust invests in the shares of mining firms operating in every corner of the globe. Its largest holdings include mining giants like Glencore, Rio Tinto, and Vale, the world’s largest producer and exporter of iron ore.
However, I also like that it holds smaller unlisted stocks and uses fixed income to enhance dividends.
Long term, the trust has a tremendous record of increasing dividends and I’m reassured by the very experienced management team in place.
Another thing I like here is that gearing is not too excessive. On 30 June, it stood at 9.6% of net assets, well below the 25% limit that it aims not to exceed.
Cyclicality and macro worries
Mining stocks are naturally cyclical, which can result in above-average volatility.
Specifically, they get sent up and down by what’s going on in China, which consumes mind-boggling amounts of raw materials. For example, it consumes a little more than half of the world’s copper supplies!
In 2023, there have been major economic problems in the People’s Republic. Growth has slowed and there has been a property crisis unfolding for a while. Chinese stocks have tanked. There’s a lot of risk here.
As a result, mined commodity prices have been volatile and miners have been cutting dividends. This could put some pressure on the trust’s high 7.5% dividend yield, at least in the near term.
All of this has contributed to a 24% share price decline this year.
The long-term picture
Given this gloomy situation, why am I so keen to invest?
It’s the decarbonisation trend, in a nutshell. There has never been greater need for metals and minerals. In particular, lithium (used in electric vehicle batteries), iron ore, and copper are at the very heart of the energy transition. The trust’s portfolio gives investors significant exposure to all three.
Regardless of what happens in China in 2024, metal and mineral demand should only increase dramatically in future as the global economy moves towards net zero.
Of course, there’s an inescapable irony here. It will be the resource producers — so long maligned for their own carbon-heavy processes and environmental records — that are absolutely crucial to a greener future.
But the fact remains that the energy transition should underpin mining profits and payouts for decades to come.
That’s why I’ve been greedily gobbling up more shares recently at just over £5 to take advantage of the share price weakness. I’ll scoop up more when I can.
