I reckon investors like me can still pick up top FTSE 100 stocks at bargain prices. After last week’s Pfizer vaccine news, and the Moderna vaccine news announced yesterday, the outlook for 2021 is that bit brighter.

Goldman Sachs certainly thinks so. It reckons the FTSE 100 will rise 14% by the end of next year, due to monetary stimulus and a global economic recovery. That would lift it to around 7,250 from today’s level. The Pfizer and Moderna vaccines have logistical issues, but there are also others in the pipeline. I’m feeling more optimistic, and here are two stocks I’d buy to play the next leg of the recovery.

I like the BP share price

The BP (LSE: BP) share price crashed along with the oil price during lockdown. But Goldman Sachs reckons it could hit to $65 a barrel next year (up from $44 today). If so, this bargain stock could fly.

Climate change is arguably a bigger challenge than Covid, as the shift to renewables accelerates. However, I still believe wind, solar, and hydrogen have a long way to go before they can shift fossil fuels from the heart of the world economy. Just 3% of the world’s cars are electric, and none of its jet planes. BP may face a tough transition, but when the pandemic eases, oil demand will inevitably surge.

The BP share price is down by half this year, which makes it look like a bargain stock to me. It currently yields a mighty 6.6%, and is the second biggest income payer on the FTSE 100, after British American Tobacco.

I’d buy this bargain stock too

I would also consider buying another top FTSE 100 dividend stock, mining giant BHP Group (LSE: BHP). If the world does escape Covid-19 next year, this will also liberate demand for natural resources stocks.

China, the world’s biggest consumer of commodities, is already on the way back, helping BHP post a 7.2% rise in first-quarter iron ore production. Just remember that there are political risks on this front. China threatened Australian coal imports after the government called for a Covid-19 enquiry, and BHP has large deposits in the country.

The BHP share price has fully recovered from the March crash, and now trades at similar levels to the start of the year. I still reckon it’s a bargain stock, trading at just 12 times earnings. In return, it will give me a juicy yield of 5.6% a year, covered 1.5 times by company earnings.

These numbers make BHP Group look a buy to me. If the vaccines live up to their billings and the world gets back to work, this bargain stock could spearhead the recovery.

The post FTSE 100 to ‘smash through 7,000’! I’d buy these 2 bargain stocks before the next leg of the recovery appeared first on The Motley Fool UK.

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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.

Here are two FTSE 100 dividend stocks yielding more than 6% a year that I would consider buying right now.

WPP

Global advertising giant WPP (LSE: WPP) has been through a torrid time, following the forced departure of driving force Martin Sorrell, until April 2018 the FTSE 100’s longest-serving boss.

The WPP share price was also hit by a downturn in advertising, and fears that Google and Facebook will suck up too much activity, but it is starting to make a tentative recovery, up 18% over the last year. It is also back on the acquisition trail, recently buying US marketing consultancy Xumak.

New chief executive Mark Read is roughly halfway through a three-year recovery plan, and is enjoying some early success, winning new brands including Instagram, L’Oréal and Vodafone. Its third-quarter update, the most recent, reported major wins including Mondelez and eBay, while revenue from continuing operations climbed 5.2% to £3.29bn.

It is growing strongly in most parts of the world, notably South East Asia, Latin America and the Middle East, but continues to struggle in its key North America market, which accounts for a third of the group’s total revenues. WPP recently sold a 60% stake in its Kantar business for £1.4bn, using the money to pay down debt and return money to shareholders through buy-backs.

WPP’s recent problems are reflected in a cut-price valuation of 10.8 times earnings, while you get a generous forecast yield of 6.2%, covered 1.6 times by earnings. In 2021, those earnings are forecast to rise 8%, another sign that WPP’s future now looks more promising.

BHP Group

Mining giant BHP Group (LSE: BHP), formerly BHP Billiton, is a massive global operation with a market cap topping £89bn. It produces key metals such as copper and iron ore, as well as coal, and also has extensive oil and gas exploration and development capabilities.

Recent share price performance has been disappointing, with the stock down 5% over the year. The BHP share price faces several headwinds, right now. Commodity giants rely on China for much of their demand, and could take a hit from a coronavirus-related slowdown. Concerns over global growth will also weigh on demand for copper and iron ore, while its fossil fuel energy operations could also come under pressure due to climate concerns.

Yet new CEO Mike Henry reported a continuing solid operational performance in the group’s most recent operational review, which saw BHP on track to deliver slightly higher production, amid strong petroleum and copper exploration programmes.

Again, the stock is available at a discounted price, in this case 11 times forward earnings, and a yield of 6.2%, covered 1.5 times by earnings. If the economy picks up later this year, now could be a good entry point for both stocks.

The post Have £3k to invest? Here are 2 FTSE 100 dividend stocks I’d buy today appeared first on The Motley Fool UK.

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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.

The old adage never put all your eggs in one basket applies. I think the following five FTSE 100 companies could all make attractive long-term buy and holds. Just make sure they balance any existing holdings you have.

Aviva

Insurance giant Aviva (LSE: AV) may seem a surprise pick, as its share price has underperformed in recent years. However, that means you can buy it at a bargain 6.9 times forecast earnings, against 17 times for the FTSE 100 as a whole. Today makes a tempting entry point, as the share price may rise nicely when investors tune back into the stock.

The Aviva share prices trades 6% lower than it did three years ago, even though profits have nearly doubled and dividends have jumped 44% in that time. It now offers a fabulous forecast yield of 7.7%, covered 1.9 times by earnings. Aviva could be ripe for a rebound.

GlaxoSmithKline

Pharmaceutical giant GlaxoSmithKline (LSE: GSK) has held its prized dividend at 80p a year for years, as it focuses its resources on rebuilding its drug pipeline. Some investors have shunned the £87bn company as a result, yet it still offers a steady forecast yield of 4.5%, roughly in line with the FTSE 100 average, covered 1.5 times by earnings.

The Glaxo share price is now showing signs of life, up almost 20% over the last year. Short-term swings don’t matter that much; you should invest in Glaxo for the longer run. Buy, hold, reinvest your dividends and reap the rewards.

Diageo

Spirits giant Diageo (LSE: DGE) is an old favourite of mine. Investors are having a party right now, with the Diageo share price up 17% this year, and 75% over five years.

While there are signs of people drinking less, Diageo has caught the spirit of the times by encouraging them to drink better, by purchasing its premium brands instead. The £74bn group trades at a premium valuation of 23.9 times forward earnings, with a relatively low yield of 2.2%, covered 1.9 times. Then again, it usually does. The higher price has been worth paying.

DCC

International sales, marketing, and support services group DCC (LSE: DCC) has seen its share price double in five years, and is maintaining its momentum this year.

Management recently forecast another year of profit growth and development, and with four divisions covering liquified petroleum gas (LPG), retail & oil, technology, and healthcare, it has plenty of diversification. Recent share price growth is reflected in a slightly pricey forward valuation of 17.8 times earnings, but not that pricey. The DCC share price could be Brexit proof, too.

BHP Group

I’m throwing in a stock from the mining sector, as this gives you exposure to global growth. BHP Group (LSE: BHP) is my pick, because this £87bn group has massive diversification across copper, silver, lead, zinc, uranium, gold, iron ore, coal, and even petroleum.

The complicating factor is the US-China trade war, as China is by far the biggest source of global demand for commodities. BHP Group is cheaper as a result, trading at 11.8 times forward earnings, while the forecast yield is a bright and bouncy 6.2%.

If those don’t tempt you, try these…

The post £5k to invest? I’d pop these 5 stocks into a FTSE 100 starter portfolio appeared first on The Motley Fool UK.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended Diageo. 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.

Today I’m going to highlight three of these stocks, which all support dividend yields of more than 6%.

Global income 

My first yield pick is mining giant BHP (LSE: BHP). In August, the group announced a record dividend, rewarding shareholders after several years of cost-cutting and efficiency improvements. The company is distributing $0.78 per share on top of the $17bn already returned to shareholders in 2019.

I think it is unlikely BHP will be able to do the same in 2020, as the figures have been flattered by one-off disposals this year. Nevertheless, City analysts believe the company will produce a net profit of $10bn in its current financial year, and they reckon the majority of this will be returned to investors.

Analysts have pencilled in a dividend yield of 6.6% for the year, although considering BHP’s track record of returning cash, I think this could be a conservative estimate. Demand for essential commodities like iron ore and copper is only growing, and BHP is only getting more efficient at mining them, which suggest further profit growth is on the horizon. 

Right now you can snap up shares in this cash cow for just 10.5 times forward earnings. 

Legal requirement

My next FTSE 100 income play is insurance group Admiral (LSE: ADM). Car insurance is a tough business. Customers want to pay the lowest cost possible and insurers are having to pay out more and more to put things right when they go wrong. 

Admiral has a track record of outperforming the rest of the industry. It does this with its sector-leading cost ratio and strict underwriting standards. These efforts have helped the company remain consistently profitable while other competitors have struggled.

Management is also branching out into other lines of business such as comparison websites, loans and international car insurance. These diversification efforts only make Admiral more attractive in my eyes. 

For 2019, City analysts believe the company will distribute 124p per share to investors, giving a dividend yield of 6.1% on the current share price. Over the past six years, the dividend has grown at a compound annual rate of 14%. 

Marketing giant

The final FTSE 100 income stock I’m going to profile is marketing giant WPP (LSE: WPP). 

Shares in this business have been a pretty poor investment over the past 12 months, falling 15% excluding dividends as investors have fretted about its future potential.

However, after earnings fell 25% in 2018, City analysts are expecting WPP’s recovery to start this year. There are already some signs that the recovery is taking hold. Sales fell by just 1.4% in the second quarter of 2019, outperforming analysts’ expectations of a 3% year-on-year decline. The numbers were also “slightly ahead” of internal expectations. 

In my opinion, this progress suggests WPP is more than capable of hitting the City’s dividend targets for the company over the next two years. Analysts are expecting a per share payout of just under 60p, giving a yield of 6.5% on the current share price. On top of this, the stock is changing hands at a forward P/E of just 9.3 — a steal for such a world-class business in my eyes. 

The post 3 FTSE 100 stocks with dividends over 6% I’d buy right now appeared first on The Motley Fool UK.

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Rupert Hargreaves owns shares in Admiral Group. The Motley Fool UK has recommended Admiral Group. 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.

What I love about BHP is that, after around five years of restructuring and cutting costs, it’s now spitting out cash at an impressive rate. For example, according to the company’s numbers for its financial year ended 30 June, net operating cash flow came in at an impressive $17.4bn.

Free cash flow, which what’s left for shareholders after things like capital spending, was $10bn (around £8.2bn). That’s compared to BHP’s current market capitalisation of £85bn.

This cash generation, coupled with the fact the mining group’s net debt has declined from around $27bn in 2016 to $9.2bn today, allowed management to declare a record final dividend totalling $1.3bn for the year.

Cash flow giant

As long as BHP continues to do what it does best (pull rocks out the ground) and doesn’t get sidetracked by any costly expansion plans, I reckon it’s highly likely the company will continue to throw off cash for many years to come.

City analysts believe the stock with yield 7% this year and also 6.2% next year, although these figures are based on regular dividends. As the company demonstrated earlier this year, it’s not averse to paying out special dividends when the time is right, so the actual level of income declared could be higher. That’s why I think this stock is worth a place in your portfolio today.

Cheap income

I’m also excited by BHP peer Rio Tinto’s (LSE: RIO) cash generation. City analysts currently believe this iron ore miner will report earnings growth of 43% for 2019 off the back of high iron ore prices and better margins. They’ve pencilled in earnings per share of $6.50 for the year, compared to $4.60 for 2018.

Rio could return almost all of this to investors, the City reckons. With a relatively clean balance sheet (net gearing of 12%) and limited capital spending demands, Rio can afford to return as much as $4.60 to shareholders in 2019, according to the City’s spreadsheets. That gives a dividend yield of 9.2% on the current share price.

Unfortunately, analysts reckon earnings will slide in the following year. Nevertheless, even with a 14% decline in earnings per share projected, the City community still believes the company will be able to payout $3.70 per share to investors via dividends next year. That gives a dividend yield of 7.5% on the current price.

These projections are highly attractive and adding to the appeal is Rio’s current valuation. At the time of writing, the stock is trading at a forward P/E of just 7.6. So, not only does this mining stock offer an attractive level of income, but it’s also dirt cheap as well.

The post £10k to invest? I’d buy these FTSE 100 dividend stocks yielding 6%! appeared first on The Motley Fool UK.

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Rupert Hargreaves owns no share 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.

Patience is a virtue, but that is taking things a bit far. Especially since inflation will erode its value in real terms.

That is why I would prefer to invest in a Stocks and Shares ISA. Right now, there is a wide choice of top FTSE 100 companies offering annual dividend yields ranging from 4% to 9% the year. Here are two I would buy and hold for years and years.

BHP Group

Global resources company BHP Group (LSE: BHP) may be London listed but it’s a massive global operation, with a market-cap of £88bn. It’s the sixth largest on the entire index, sandwiched between pharmaceutical giants AstraZeneca and GlaxoSmithKline.

BHP has its finger in many pies, operating across minerals and mining, including copper, zinc, iron ore, coal, nickel and potash, as well as petroleum, technology and marketing. That means it’s plugged into the success of the global economy in general, and China in particular, for better or worse.

Mining companies can be highly cyclical, riding high in the good times, and crashing in the bad. BHP saw earnings per share drop 57% in 2015, and 81% in 2016, only to storm back by a whopping 455% the next year. Growth has been pretty steady since then, and analysts are predicting another 22% this year.

That’s despite the various worries afflicting the global economy, as the bull run gets long in the tooth, and the US China trade war and Brexit cast clouds. I can’t imagine President Donald Trump’s impeachment battle will help, either.

However, these concerns are partly reflected in the price, with the BHP share price trading at 12.3 times earnings, while the forecast yield is currently 6.7%. Incredibly, it will return $17bn to shareholders in 2019.

Aviva

Most people don’t think of FTSE 100-listed insurer Aviva (LSE: AV) as an international company, such is its strong UK presence, but it also operates in North America, Europe and Asia, which account for just over half of its total business and give it much-needed diversification as Brexit continues to hit growth at home.

Aviva is a multi-lines insurer that offers life and pensions policies, savings, general insurance, health and protection insurance, and is spreading its wings into corporate multinational, bulk purchase annuities, home, digital and small-to-medium-sized businesses.

Despite that, the Aviva share price has repeatedly disappointed, trading 25% lower than five years ago. This leaves it at a bargain valuation 6.7 times forward earnings.

The £15bn group recently warned that it would struggle to maintain profit growth, after posting 7% earnings growth in each of the past two years. The bad news is out there, which could make now a good time to buy. Especially as you get a forecast yield of 7.8%, with cover of 1.9. Better still, the balance sheet is strong.

I still believe the Aviva share price will recover, if you give it time. In the meantime, you get that massive income stream, which destroys every Cash ISA on the market.

The post Forget a Cash ISA: I’d buy these 2 FTSE 100 dividend stocks today instead appeared first on The Motley Fool UK.

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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.

As a result, I think you’d be better off investing a portion of your money in FTSE 100 income stocks, instead of leaving it to languish at that low rate.

One of the stocks I think could be a great place to invest your cash in is mining giant BHP (LSE: BHP). Only a few years ago, BHP was struggling with high levels of debt and falling commodity prices. However, over the past few years, management has pulled off a fantastic transformation. The group has become a cash machine. Debt has fallen and shareholder returns have exploded.

Following this transformation, BHP has become one of the most attractive income stocks in the FTSE 100. 

Record dividends

Last month BHP announced a 2% increase in profit for its 2019 financial year. This was slightly below analysts’ expectations, but strong cash generation allowed the company to declare a record full-year dividend of $0.78 (64p) per share. Following this payout, the group will have returned $17bn to shareholders in 2019, a return of roughly 15%. 

BHP might not be able to return 15% of its market capitalisation again next year, but its dividend yield is expected to come in at a market-beating 6.8%, according to City analysts. With $8bn of capital spending planned and cash flow from operations estimated at $17bn, it looks as if the company will have plenty of cash left over to return to investors. 

Business transformation 

Commodities giant Glencore (LSE: GLEN) is another FTSE 100 income champion that I think could boost your income generation. Just like BHP, over the past few years, Glencore has been restructuring its operations. Net debt has fallen from $52bn in 2013 to $34bn at the end of 2018 as the firm has sold off assets and prioritised cash generation. 

The group has also been building out its mining business. When it went public in 2011, Glencore was primarily a commodities trader. This business is much more cyclical than getting rocks out of the ground and requires a lot of capital. That’s one of the reasons why the enterprise has three times more borrowing than BHP, even though the latter is three times the size of the former.

In 2011, the earnings before interest, tax, depreciation and amortisation split between the group’s mining and trading business was around 50:50. Last year mining accounted for just 16% of total EBITDA. 

I think this transition makes Glencore a much more attractive income stock. At the time of writing, the City is predicting a dividend yield of 5.6% for the company next year. The payout will be covered 1.3 times by earnings per share. On top of this, earnings are expected to expand 40% in fiscal 2020, which puts the stock on a forward P/E of 9.8. That’s a relatively undemanding multiple for this global commodities trading house in my view. 

The post Forget the Cash ISA. I like these FTSE 100 dividend stocks that yield 6%! appeared first on The Motley Fool UK.

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Rupert Hargreaves owns no share 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.

In a trading update for the 12 months ending 31 October, the company announced that due to “the deteriorating macro environment” and “weak sales execution” it’s likely to miss revenue expectations for the full-year.

Management had been forecasting a full-year constant currency revenue decline of 4-6%. However after recent developments, the board has considered appropriate to revise the guidance to down 6-8%. Following this performance, management has decided to “accelerate a strategic review of the group’s operations” to optimise Micro Focus’ portfolio of products.

Focus on the long term

While today’s update is disappointing, I think the market reaction is a bit over the top. Yes, sales are expected to fall faster than anticipated, but the firm also says in its release that sales staff are pursuing “a significant pipeline” of business opportunities. Closing these deals by the end of the company’s fast-approaching financial year is the challenging part.

This isn’t the first time Micro Focus has run into problems. The good news is, in the past whenever the company has hit a speed bump, management has always managed to get the business back on track. I think there’s a high probability the same will happen this time around.

The company also has a strong track record of returning cash to investors. In fact, you could argue management has prioritised cash returns since its inception. I don’t think this is going to change any time soon and, after recent declines, shares support a dividend yield of around 9.5%. I think this dividend yield is here to stay.

I would even go so far as to say that based on its history of cash returns, Micro Focus is a stock you can buy and forget in your retirement portfolio for the long term. The City has not yet had time to reflect the lowered revenue target into their earnings forecasts, but I reckon the stock is trading at a mid-single-digit P/E after today’s slump.

Record returns

If software is not your thing, then another dividend stock I think will pay you for the rest of your life is mining group BHP (LSE: BHP). Two weeks ago, BHP declared a record dividend of $0.78 off the back of a 2% rise in underlying profit for its financial year to the end of June.

Underlying profit for the 12 months rose to $9.1bn from $8.9bn a year earlier. The record distribution comes after a year of record cash returns to investors. In the 2019 financial year, BHP has returned a total of $17bn to shareholders, excluding the final distribution.

With net debt at just $9.2bn at the end of the period, down from $26bn at the end of 2016, costs at record lows, and capital spending commitments for the next 12 months well-funded, I think there’s a good chance BHP will remain a dividend champion for the foreseeable future.

For fiscal 2020, City analysts have the stock yielding 7.5% and, based on current earnings estimates, it’s dealing at a forward P/E of 9.3.

The post 2 cheap FTSE 100 stocks I think will pay you for the rest of your life appeared first on The Motley Fool UK.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Micro Focus. 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.

Ethical considerations aside, I think these companies are highly attractive income plays because they’re throwing off cash. On top of this, each business has its unique qualities, which make it stand out.

Economies of scale

Rio Tinto is the world’s largest producer of iron where it has unrivalled economies of scale in production. These economies of scale, coupled with the company’s asset disposal programme, have helped the business generate $46bn from its operations and assets sales since 2016, a colossal amount of money.

Most of this has been returned to investors, with $29bn distributed to shareholders via dividends and share buybacks. Rio has also used $14bn to pay down debt. 

I think it’s unlikely this level of cash return will continue because the company’s asset sales seem to be slowing down. However, Rio is still generating billions of dollars in cash from its operations. City analysts expect the group to report a net profit of $11.3bn in 2019, funding a total dividend distribution of $4.60 per share, according to forecasts. At the current share price, this translates into a dividend yield of 7.5%.

Trading business

Glencore’s unique trait is its trading business. Even though the company does make money from pulling commodities out of the ground, the bulk of its earnings come from trading, which involves acting as a middleman between buyers and sellers of commodities around the world.

The great thing about this business is it’s relatively stable. If earnings at Glencore’s production businesses fall, the trading division usually picks up the slack, providing much-needed cash to support the business and the dividend.

Last year, trading earnings before interest and taxes was $2.4bn, which helped support management’s decision to return $3bn to shareholders by way of a share buyback.

Another reason why I like this commodity business is the fact its managers own a significant stake in the group, so they profit alongside other investors. City analysts believe the company’s dividend yield will be 5.5% this year. Based on current estimates, the stock is trading at a forward P/E of 11.7.

Payout rising

Finally, we have BHP. This is the world’s largest diversified mining group, and size is its most significant advantage over the rest of the industry. Like peer Rio, during the past few years, the company has been concentrating on optimising its operations. Debt has been reduced and now sits below management’s targeted $10bn-$15bn range. Shareholder distributions have been increased as cash generation has improved. Total returns in the last six months alone exceed $13bn, and it doesn’t look as if BHP is going to stop there.

Now debt has fallen below management’s targeted range, the company has said it will increase dividends, from a minimum of 50% of earnings to 75%. Analysts’ initial figures suggest this could mean shareholders are in line for a total dividend of $2.06 this year, a dividend yield of 8.2% on the current share price.

In addition to this market-beating level of income, the stock trades at a highly attractive forward P/E of 12.4. While mining companies wouldn’t be for everyone, it’s difficult to ignore these attractive metrics.

The post 3 FTSE 100 dividend stocks with 5% yields I’d buy right now appeared first on The Motley Fool UK.

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Rupert Hargreaves owns no share 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.

Metal machine

Today, the mining giant issued its operational review for the 12 months to 30 June with all major projects tracking to plan, with the exception of one or two minor setbacks.

Underlying improvements in productivity were dented by unplanned production outages of $835m during the first half, notably flooding in its Queensland metallurgical coal operations and changes to its Nickel West mine plan.

Higher costs in thermal coal and declining copper production also hit the FTSE 100 group, which forecast $1bn in productivity losses in 2019 due to these disruptions.

None of which has worried investors as the share price has risen slightly today, with BHP reporting it has exceeded full-year production guidance for petroleum. Iron ore output recovered in the fourth quarter after a cyclone knocked production in March, and it could grow by up to 6% next year.

Swings and roundabouts

The £108bn group is the world’s largest mining company and for that fact alone probably merits a place in most well-diversified portfolios. As with any commodity stock, the group’s share price tends to be volatile on a day-to-day basis, cyclical in the medium term, but rewarding in the longer run, which is what you should be looking at.

The stock did slip earlier this year when it reported a drop in production and earnings. But demand for metals, such as copper and iron ore, remains high and management’s biggest challenge is actually finding enough to meet demand.

BHP stock has doubled your money in just three years yet still trades at just 13.1 times forecast earnings, which are expected to grow a healthy 18% this year and 20% next. The forecast yield is now 8.6% for 2019, and 6.7% for 2020. It looks a buy to me.

Rio Grande

Commodity stocks have a habit of rising and falling in line with each other as macro fundamentals drive share price performance rather than micro differences. So fellow FTSE 100 commodity giant Rio Tinto (LSE: RIO) is also up 25% this year. It’s also up 95% over three years, again, rising in lockstep with BHP Group.

On the other hand, individual company problems can weigh. For example, costs on Rio Tinto’s Oyu Tolgoi underground copper mine in Mongolia have spiralled from an estimated $5.3bn to potentially $7.2bn, with the project now delayed for up to 30 months.

China on my mind

Roland Head believes the Rio Tinto share price may have peaked as post-tax profits hit a record £13.6bn last year. But analysts now forecast slippage to $10.5bn for 2019, then $9.1bn the year after. This may be reflected in the £61bn group’s lower valuation of just 8.9 times forecast earnings, which buys you a yield of a whopping 7.3%.

With both stocks, the big worry is that the Chinese economy will slow further and demand will fall. However, analysts have been warning of this danger for years, and it hasn’t happened yet. If I was only going to buy one FTSE 100 mining giant today, it would be BHP Group. Although in the long run, I’d be looking to buy both.

The post These 2 FTSE 100 stocks could give you dividend income and growth for decades to come appeared first on The Motley Fool UK.

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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.