Choppiness on commodity markets has impacted performance of late, as full-year results on Tuesday (19 August) show. But today’s update has also underlined BHP’s robustness, even in the most challenging times.

Here’s why I think the metals giant is a top stock to consider.

Operational strength

Despite the support of a strong copper price, falling iron ore and coal values meant BHP’s revenue dropped 8% in the 12 months to June, to $51.3bn, it said today.

This pulled underlying EBITDA 10% lower, to $26bn.

BHP makes 55% of earnings from iron ore alone. Given this, it’s not surprising that the company’s top and bottom lines dropped year on year.

Yet despite this disappointment, financial 2025 was largely a solid one for BHP. Iron ore output edged 1% higher, to 263m tonnes. But copper was the real star of the show — annual production here rose 8%, coming in above 2m tonnes for the first time.

That’s not all, as BHP also continued to impress on the cost front. Thanks to its low-cost iron ore operations in Western Australia, its group underlying EBITDA margin remained rock solid at 53%. This was down just 1% year on year, despite that much-sharper revenues drop.

Long-term appeal

Today’s update underlines the perils of holding mining stocks. Even businesses with strong operational records can see sales and earnings tumble when commodity prices weaken.

In the last year, BHP shareholders have seen the value of their shares fall. They’ve also endured a sharp cut to the yearly dividend, the total payout dropping 25% in financial 2025 to 110 US cents per share.

But for investors who can stomach such volatility, mining stocks can be excellent long-term investments. In the case of BHP, its share price has more than doubled over the past decade. It has also delivered a steady stream of dividends ($59bn worth since the start of the 2020s alone).

Room for growth

For patient investors, I believe the Aussie miner could remain a lucrative share to hold. This reflects not only the company’s long record of operational robustness. It also has the scale to capitalise on rising metals demand, and is reshaping its portfolio to target fast-growing sectors:

I’m especially encouraged by BHP’s growing role in copper, a segment in which output has risen 28% in the last three years. This is a critical component in multiple industries, including electric vehicles, renewable energy, consumer electronics and information technology.

As red metal demand booms and supply shortages emerge, this alone could be an enormous money spinner for the company.

But it’s not all about copper. I’m also hopeful its major new potash projects will boost long-term earnings, and that ongoing investment in low-cost iron ore will remain a foundation for strong growth.

While not without risk, I think BHP shares are worth serious consideration right now.

The post BHP shares rise on strong trading update! Is it time to buy in? appeared first on The Motley Fool UK.

The share in question is Rio Tinto (LSE:RIO). But I have no plans to cut it loose, as I’m confident it will come back strongly over the long term.

Here’s why.

Market opportunity

Owning mining shares can be a bumpy ride at the best of times. Even when commodity prices are strong, a company’s earnings can underwhelm if problems at key mines develop. Strikes, power outages and disappointing ore grades are all constant threats.

Holding metals producers is especially risky today as trade tariffs dent global growth and sap commodities demand. In China — which consumes approximately half the world’s copper — the Caixin manufacturing PMI gauge slumped into contraction in May and to its lowest since 2022.

While things could get more painful for Rio Tinto, I have no intention of selling my shares. The long-term outlook for metals demand remains robust, and some key metals (like copper, aluminium and lithium) face potential supply shortages that may drive prices through the roof.

BHP thinks that copper production, for instance, will be 15% below current levels by 2035 as mines get older and ore grades decline. Yet at the same time demand for the red metal is tipped to balloon, driven by factors including:

• Increasing electric vehicle (EV) sales.
• Rising renewable energy capacity.
• Rapid data centre growth.
• Ongoing urbanisation in emerging markets.

Financial strength

Rio Tinto is investing heavily in copper and lithium projects to harness the opportunities from the fast-growing green economy. This includes organic investment — such as expansion of the mammoth Oyu Tolgoi copper project in Mongolia — as well as through acquisitions. Examples include the $6.7bn takeover of Arcadium Lithium in March.

It’s also spending heavily at its core iron ore division, with the Simandou project in Guinea (annual production target: 60m tonnes) set to come on-line later this year. Expenditure here could also turbocharge long-term earnings, though the demand and supply outlook for the iron ore market is more uncertain.

Rio Tinto has considerable financial strength it can employ to continue investing for growth, too. Its net gearing ratio was a modest 9% at the close of 2024.

Long-term winner

Rio Tinto’s shares have fallen 22% over the last year, yet they’re still up by more than two-thirds (67%) over a 10-year horizon.

Combined with dividends paid over the last decade, the mega miner has provided an average annual return of 9.9%. To put that into context, the broader FTSE 100 has delivered an average annual return of 6.3% in that time.

This illustrates the wisdom of holding mining shares over the long haul. Looking ahead, I think returns from Rio Tinto could improve as the energy transition and booming digital economy boost metals consumption.

With an attractive forward price-to-earnings (P/E) ratio of 9.3 times, I think it’s worth serious consideration.

The post Forget short-term pain! I’m holding this FTSE 100 share for long-term gain appeared first on The Motley Fool UK.

Global shortages and robust minerals prices have helped the stock to a five-year gain of 50%, while the FTSE 100 has managed just 7%.

More copper

Copper production rose in the first half, by 7% compared to the first half last year. The price of the metal has slipped in the past 12 months, though, which takes a bit of the shine off.

Still, the long-term trend might be fine, with copper prices nicely ahead over five years.

Iron ore production was mixed, up 4% between Q1 and Q2, but down 2% in the half. However, the ore price has gained in the past 12 months.

FY production guidance is largely unchanged, except for a lowering of metallurgical coal output.

Pick of the sector?

I’m mainly bullish over the whole mining sector for the long term. As there’s so much worldwide uncertainty, stock prices don’t look too high, and dividend yields are healthy.

China is the big unknown, as it tends to drive global prices. And the country has admitted it faces a tough economy.

But it already looks like stimulus measures could help soften any dip, and I expect long-term demand to hold up.

Risks

The main thing I don’t like about the sector is that it has no control over the prices of its products. And they’re indistinguishable anyway. Copper is copper, no matter who you get it from.

But I do think the demand could hold up, as we shift more and more to renewable energy. That should mean rising electricity generation, which could be good for copper prices.

Any dips in copper or iron prices, though, could hit the BHP Group share price. And if dividend forecasts should fall, we could see more pain.

Valuation

Forecasts for the next few years are pretty flat. But I think I’d put that down mainly to the great uncertainty in the markets.

When you just don’t know what’s likely to happen next year, the safest prediction is probably that it will be a lot like this year.

We’re looking at price-to-earnings (P/E) multiples of around 11 to 12, with a dividend yield of 5.8% this year. The yield could dip a bit, but I think there’s room there for it to still be decent.

Long term

For anyone wary of the short-term share price in the next 12 months or so, I think it could be volatile. And I’d stay away.

But long-term investors need to expect volatility in this sector, as it’s just something we can’t avoid. And on today’s valuation, I reckon those looking to buy and hold for 10 or 20 years could to well to consider BHP.

But I do think the next five to 10 years could test our nerves a bit.

The post With production strong, is the BHP Group share price heading for good times? appeared first on The Motley Fool UK.

Rio Tinto

Starting with Rio Tinto, analysts expect it to reward investors with a dividend payout of $4.54 per share for 2024. At today’s share price and exchange rate, that translates to a yield of about 6.5%

Earnings of $7.44 per share are projected for the year, giving a dividend coverage ratio (a measure of dividend safety) of about 1.6, which isn’t bad (ideally I like to see a ratio of two).

Now, 6.5% is obviously a pretty decent yield. That’s well above the FTSE 100 average (roughly 3.5%).

But investors should be aware of the risks here. Rio Tinto’s fortunes are largely tied to the iron ore price. If it was to fall, due to economic weakness for example, investors might be looking at lower dividends as well as a lower share price.

It’s worth pointing out that dividend forecasts can be inaccurate at times.

BHP

Turning to rival BHP, it’s a little unique in that its financial year ends on 30 June. So I’m going to provide the dividend forecasts for both the year ending 30 June 2024 (FY2024) and 30 June 2025 (FY2025).

For FY2024, the forecast is currently $1.54 per share. For FY2025, it’s $1.49 per share. These estimates translate to yields of 4.9% and 4.8% at today’s share price and exchange rates.

Dividend coverage stands at 1.8 for FY2024 and 1.7 for FY2025.

The yields here are attractive. But again, the iron ore price is a risk factor. So is the copper price, as this is BHP’s second largest commodity by revenue.

If either of these were to crash in 2024, investors may be looking at negative returns.

Glencore

Finally, we have Glencore, which is currently forecast to pay out 23.3 cents per share for 2024. That equates to a yield of about 4.1% at today’s share price and exchange rate – the lowest of the three commodity companies.

Earnings are expected to come in at 50 cents, giving a dividend coverage ratio of about two, which is healthy.

Now, one thing to understand about Glencore is that it’s both a miner and a commodity trader. So there’s an extra layer of risk here.

Not only do investors face traditional mining risks (eg lower commodity prices, operational setbacks, etc) but they also face trading risk. If the company was to rack up a stack of losses from trading, investors could lose out.

My pick of the three

As for my pick of the three, I’d probably go with BHP. Its yield isn’t as high as Rio’s. But I like the fact it has a lot of exposure to copper, which is likely to be in high demand in the years ahead, due to the renewable energy shift.

That said, if I was building a portfolio for income today, I’d mainly focus on other sectors. For me, miners are just too unpredictable.

The post Here are the BHP, Rio Tinto, and Glencore dividend forecasts for 2024 appeared first on The Motley Fool UK.

The temptation rises when I look at dividends. After a downturn in commodities prices, forecasts suggest they’ll fall.

But we’re still looking at yields bottoming out at around 5.5% over the next two or three years. And if that’s the worst a mining down cycle brings, then yes, BHP might be a buy.

Full-year results

FY23 results were out on 22 August. And they leave me in a bit of a dilemma. Iron ore production rose by a modest 1%, with copper production up 9%. Metallurgical coal output was flat. And those are the main three commodities that drive the BHP share price.

But in a year when prices fell, total group revenue declined by 17% to $54bn. And underlying EBITDA dropped 31% to $28bn.

Chinese worries

The main takeaway for me from these latest figures is not financial. No, it’s the fact that commodity demand has remained relatively robust in China and India even as developed world economies have slowed substantially. In the near term, China’s trajectory is contingent on the effectiveness of recent policy measures.

Typing ‘China’ in my browser search box, and the first suggestion I see is ‘China economy’. And the headlines it leads to are all about the slowdown.

Share price

It’s also worth looking at the longer-term share price. Now I don’t put much store in share price charts, but BHP’s are still up 30% in the past five years.

Share price cycles like this tend to lag economic cycles. And there are signs the economic cycle could have further to fall before it turns up again.

So what should we investors do when we’re faced with puzzles like this?

Fundamentals

Part of me wants to just ignore all this cyclical stock stuff and just look at fundamental measures. I mean, that’s what long-term investors do, right?

The 2024 outlook suggests a price-to-earnings (P/E) ratio of a bit over 11, which doesn’t look too stretched. And those 5.5% dividend yields look good, as long as that’s about as low as they get.

BHP’s costs are at the low end of the business. And its iron ore and copper production run with healthy margins.

So I’d say there’s a bit of competitive safety advantage there in the event of a longer downturn.

Back to China

But I just can’t ignore China and its weakening economic outlook. China is, after all, BHP’s biggest customer — as it is with a number of mining stocks.

While I try to ignore short-term moves, the commodities cycle can easily be long enough to creep into my long-term investing horizon.

I love billionaire investor Warren Buffett’s suggestion to invest as if the markets were set to close for the next decade. But 10 years might still not be long enough to see this one out.

Should I buy?

So bottom line for me? Well, BHP shares are tempting. And I do rate the company highly in its sector. But I’m going to sit this out and watch, and hope for better future buying prices.

The post BHP Group shares are down 20% in six months. Time to buy? appeared first on The Motley Fool UK.

Bullish

By Royston Wild. BHP Group’s share price has plummeted 20% year to date as I write. The Australian mega-miner has dropped as worries over global economic growth (and by extension commodities demand) have ramped up. 

I think this weakness represents an opportunity for long-term investors to grab a bargain. The former FTSE 100 stock trades on a forward price-to-earnings (P/E) ratio of 10.2 times. It also carries a bumper 6.9% prospective dividend yield. 

It’s my view that BHP shares could soar from today’s levels as demand for its raw materials ramps up. Rapid adoption of electric vehicles and renewable energy technology could supercharge sales at its copper and iron ore operations. Demand for its potash could surge as farmers seek to improve crop yields to feed the growing population. The list goes on. 

I also like BHP because of the low production costs enjoyed across its asset portfolio. Its Chile copper mines and iron ore projects in Australia are amongst the most cost effective in the business. This provides profit margins with a beefy boost. 

Royston Wild does not have positions in BHP Group.

Bearish

By Roland Head. BHP’s annual profits have risen from $6bn to $28bn since 2017. Shareholders have received about £9 per share of dividends in that time. That’s equivalent to 90% of the £10 share price in 2017.

Why aren’t I buying? Simply put, I think this is as good as it gets for now.

Mining is a cyclical business. BHP and other iron ore producers have enjoyed a spectacular boom over the last couple of years. All the signs suggest that things are now calming down.

After spiking to record highs in 2021, the price of iron ore is back down to more normal levels.

There are also worries about the state of the global economy — especially in China, which is BHP’s biggest single customer.

Broker forecasts point to a steep fall in earnings (and dividends) over the next couple of years.

I’m steering clear of BHP until the market provides a cheaper entry point.

Roland Head does not own shares in BHP Group.

The post Bull vs Bear: BHP Group shares appeared first on The Motley Fool UK.

[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

Alpha Group International

What it does: Alpha Group provides currency risk management and alternative banking solutions to small and medium-sized enterprises worldwide.

By Zaven Boyrazian. Alpha Group International (LSE:ALPH) continues to impress with its innovative fintech solutions. What started as a foreign exchange risk management business is rapidly evolving into a complete alternative digital banking suite.

Today its FX risk management division serves just over 1,000 clients. But despite only being launched a few years ago, its alternative banking division has been adopted by 4,200 businesses – more than double versus 2021.

The firm continues to fend off fierce competition, especially from traditional corporate banks with far superior resources. However, Alpha Group seems to be putting up a good fight, with revenue and profits climbing by double-digits across the board as it slowly takes market share.

With no debt on its balance sheet and a growing international footprint, the firm looks like it’s just kicked off an explosive long-term growth story. That’s why it’s one of the largest positions in my portfolio.

Zaven Boyrazian owns shares in Alpha Group International.

Ashtead

What it does: Ashtead is an international equipment rental company that operates in the US, the UK, and Canada.

By Edward Sheldon, CFA. Ashtead (LSE: AHT) shares have had a pullback recently and I think this is a good buying opportunity for investors.

A recent Q3 trading update showed that the company has momentum right now. For the first nine months of the current financial year (ending 30 April), group revenue was up 25% year on year. Growth was driven by US mega projects, with US rental revenue up 27% year on year.

On the back of this encouraging trading update, analysts at Jefferies raised their price target from 6,000p to 7,000p. That price target is about 40% higher than the current share price.

An obvious risk here is a sharp economic downturn in the US. If the nation was to experience a deep recession and construction came to a halt, Ashtead would most likely be impacted negatively.

I’m comfortable with this risk, however. Overall, I think the risk/reward setup is attractive.

Edward Sheldon owns shares in Ashtead

Associated British Foods

What it does: Associated British Foods is a global food, ingredients and retail provider.

By Gordon Best. With a diverse range of essential products, Associated British Foods (LSE:ABF) is in a strong position to succeed through uncertain economic conditions.

It is good value compared to competitors, with a price-to-earnings (P/E) ratio of 21, below the food industry average of 30. When considering a discounted cash flow model, the company may have further growth ahead, with the current share price of 19,02p nearly 20% below the fair value of 23,71p. Short- and long-term debts are sustainable, and the dividend is a healthy 2.3%, growing for the last 10 years.

Future earnings growth of 10.2% is slightly below the UK market average of 10.5%. However, with widespread uncertainty, I value growing companies with solid fundamentals making essential products. 

The management team has an average tenure of 18 years, and major shareholders have recently been buying more shares than they have been selling, demonstrating confidence in future performance.  

Gordon Best does not own shares in Associated British Foods.

BHP Group

What it does: BHP Group is a multinational mining and petroleum company that extracts and processes iron ore, copper, coal, nickel, zinc, uranium, and other metals.  

By Mark Tovey. UK investors are spoiled for choice when it comes to FTSE 100 mining companies, with six high-quality multinationals on offer. Based on the financials, BHP Group (LSE:BHP) is my pick. 

BHP is trading at an attractive ratio of just nine times free cash flow – lower than all its FTSE 100 peers, with the exception of Glencore.  

In addition, BHP’s total debt to tangible book value ratio is just 39% compared with, for example, Anglo American’s 59%. That gives BHP more flexibility than all of its peers to survive lean times. Investors in natural resource companies like BHP need to have a strong stomach for price swings. 

But the metals business is an essential and growing one. The world consumes the equivalent of 500 Eiffel Towers’ worth of metals a day. That massive demand is expected to skyrocket in the coming decade with the rollout of green technologies. I own shares in BlackRock World Mining, which has BHP as its biggest holding. 

Mark Tovey owns shares in BlackRock World Mining.

Centamin 

What it does: Centamin produces gold from Egypt’s Sukari mine and owns exploration assets elsewhere in Africa. 

By Royston Wild. Piling into classic flight-to-safety assets might be a good idea as the banking sector shakes. One way investors can do this is by buying shares in gold producer Centamin (LSE:CEY). 

Bullion demand comes alive when economic crises come along. The yellow metal’s surge back above $2,000 per ounce in March is evidence of this. 

This in turn has pulled the share prices of miners like Centamin higher. And I believe the low earnings multiple of this particular operator leaves scope for even further gains. Today the African digger trades on a forward price-to-earnings (P/E) ratio of just 7.1 times. 

Signs of fresh stress for the world’s banks could drag gold higher. So could hints that central banks will stop hiking interest rates or even cut their benchmarks to calm turbulent markets. Such an event might mean that inflation remains higher for longer, one of the strongest drivers of gold prices. 

Royston Wild does not own shares in Centamin. 

Diageo

What it does: Diageo is an alcoholic beverage company. It owns over 200 brands and has sales in more than 180 countries. 

By Paul Summers. The last few weeks have heaped yet more pressure on company share prices and, consequently, more misery on already-battered investors. Since things might still get worse before they get better, my pick for April is an old favourite with solid defensive credentials.

Sure, Diageo (LSE:DGE) isn’t the cheapest stock to buy (a forecast price-to-earnings ratio of 21). However, it’s a company that has shown itself adept at riding out crises. Regardless of what happens next in the new banking ‘crisis’, people will still drink. And when the good times return, they’ll want to enjoy themselves.

Interestingly, the shares are still down from where they were 12 months ago — I’d say this is an opportunity to buy.   

The 2.2% dividend yield is modest but safe. That’s more than you can say for some of Diageo’s FTSE 100 peers.

Paul Summers does not own shares in Diageo.

Experian

What it does: Experian is a credit bureau. It provides data and consumer information to lenders, most notably banks.

By Stephen Wright. Experian (LSE:EXPN) shares are currently at their lowest levels since the start of the year — I think this could be a good buying opportunity.

In my view, Experian is one of the strongest businesses in the UK. It has a strong competitive position, low operating costs, and provides a service that its customers need.

The company’s economic moat comes from the huge database it uses in its reports. This is virtually impossible for a competitor to replicate from scratch.

As a data and analytics business, Experian doesn’t cost much to run. Around 90% of the company’s operating income becomes free cash available to shareholders.

Lastly, most US mortgages require a tri-merge report, which includes an Experian report. As such, the company provides a service that is basically essential to mortgage lending. 

I’m looking to take advantage of a rare chance to buy the stock at a decent price in April.

Stephen Wright does not own shares in Experian.

Legal & General

What it does: Legal & General is an asset manager and financial services provider based in the UK and operating internationally.

By Christopher Ruane. The financial services company Legal & General (LSE: LGEN) has a long history, providing reassurance to customers in turbulent times. But over the years it has reshaped its business and focused on where it believes it can perform strongly. That is reflected in the company’s post-tax profit margins, which last year were almost 17%.

A strong brand, large customer base and resilient demand for financial services should help the firm. Yet it trades on a price-to-earnings ratio of just 6. I see a risk that turbulent financial markets could lead to customers withdrawing funds, hurting profits. The share price has fallen 15% in the past year.

Legal & General has been a fairly regular dividend raiser, growing its payout per share 5% last year. The current yield is 8.4%. If I had spare cash to invest, I would buy the shares for my ISA this April.

Christopher Ruane does not own shares in Legal & General.

Lloyds

What it does: Lloyds is the UK’s largest mortgage provider. It’s also one of the nation’s biggest banks with over 30m customers.

By John Choong. Bank stocks may be falling out of favour as the recent collapses of SVB, Signature, and Credit Suisse have sparked contagion fears. However, I believe the recent dip in Lloyds (LSE:LLOY) shares could present a buying opportunity for a couple of reasons.

The first being that Lloyds and its British rivals are subject to much stricter capital regulations and buffers, as they’re under the scope of a more stringent regulatory bodies. As such, Lloyds boasts extremely robust CET1, liquidity coverage, and countercyclical (CCLB) ratios, which should shield it from a meltdown.

Additionally, the Black Horse bank has a less-risky deposit base, as the percentage of risk-weighted assets on its portfolio are comparably lower than its fallen competitors. Moreover, a substantial amount of its customers’ deposits are insured, meaning that a bank run is unlikely to cause massive liquidity issues.

Although Lloyds’ valuation multiples aren’t necessarily the cheapest among its FTSE 100 peers, I believe the risk-reward proposition still presents great value given its recent decline.

John Choong has positions in Lloyds

Ocado

What it does: Ocado is an online retailer that pioneers tech solutions including its proprietary automated warehouses.

By John Fieldsend. Online retailer Ocado (LSE: OCDO) offers some of the most exciting technology I’ve seen come out of this country. And I wasn’t the only one who saw its robots zipping about a futuristic warehouse and saw incredible potential. The firm’s valuation went sky-high. 

In early 2021, the grocer had a larger market cap than FTSE 100 giant and competitor Tesco despite not having a single store. The share price has come down considerably since then. It’s £4.19 today, a fall of around 85% from 2020. 

The reason for the fall in share price is likely that Ocado is yet to be profitable and, in fact, still loses money on every order.  As the Financial Times put it, “the company has effectively been paying approximately £23 per order for its customers not to go to the shops”.  

Personally, I’m excited about the potential and see it as a good price to buy in. This is why I opened a position a week ago. 

John Fieldsend owns shares in Ocado.

Shell

What it does: Shell is a global group of energy and petrochemical companies, employing 93,000 people and with operations in more than 70 countries.

By Andrew Mackie. Like so many commodities producers, the Shell (LSE: SHEL) share price has fallen heavily recently. However, for me, the fundamentals haven’t changed at all.

Supply-side constraints remain all too evident. However, this reality takes time to play out. In the short term, I have no idea where the price of oil will go. But on a longer-term basis, I expect the price to remain elevated and extremely volatile, too.

Leading exploration and production producers in the US have warned that they will probably never see production levels return to pre-pandemic levels. With the shale industry unable to bolster demand, their ability to control prices will diminish. In such a scenario, OPEC plus will once again reassert its dominance.

When one puts on top of that the reopening of China, together with a reversal in the drawdown in the strategic petroleum reserves, another damaging price surge could re-ignite the inflation dragon. In such a scenario, there is only one place for me to park my capital, and that is in hard assets. 

Andrew Mackie owns shares in Shell.

Shell

What it does: Shell is a multinational oil and gas company with over 80,000 employees in more than 70 countries.

By Matthew Dumigan. Shell’s (LSE:SHEL) share price performance was shaky in March, largely caused by a combination of the Credit Suisse crisis and the continued downward trend in oil prices.

Despite these risks and concerns, I rate Shell shares as a top buy for the month of April and beyond.

One thing I particularly admire about the company is its rock-solid financial position. In my view, this should enable Shell to fund significant organic investment in the long run, which would be a key driver of sustained growth.

Alongside this, provided the company can continue to expand its renewables and energy solutions segment, I’m confident Shell remains well positioned to develop this into a lucrative core business line. That’s great news for investors willing to hold for the long term.

Overall, with a forward P/E ratio of around 6.75, I find the company’s current valuation attractive in spite of strong share price growth in recent years.

Matthew Dumigan does not own shares in Shell.

The post Best British shares to buy in April appeared first on The Motley Fool UK.

That’s because I think we could be on the cusp of a commodity super cycle, as the world transitions from fossil fuels to materially intensive green technologies.

Guillaume Pitron, a metals expert, put it like this: “Over the next generation, we will consume more minerals than in the last 70,000 years.”

So, which FTSE 100 stock should I buy to get in on this metals boom?

The six miners

• Anglo American is a diversified mining company with global operations in copper, diamonds, platinum, and iron ore

• Antofagasta specialises in copper production in Chile and Peru

• BHP Group is a global mining company with a portfolio of commodities including iron ore, copper, coal, and petroleum

• Fresnillo explores, develops, and produces precious metals, primarily silver and gold in Mexico

• Glencore is a diversified mining and commodities trading company involved in mining, processing, and trading of copper, zinc, lead, nickel, coal, and oil

• Rio Tinto is a global mining company of commodities such as aluminium, copper, diamonds, and iron ore

Panning for gold…

Here are a couple of quick-and-dirty metrics to help me separate out the ‘pretenders’ from the contenders:

• Total debt to tangible book value: the lower this ratio, the better. According to legendary natural resource investor Rick Rule, this is one measure of “balance sheet flexibility”. Commodity markets are viciously cyclical. The less debt a miner has on its balance sheet, and the longer the duration of its obligations, the better able it will be to survive lean times.

• Price to free cash flow: this cash flow statement item shows how much money a company has left over to give back to shareholders or to invest in new projects, relative to the company’s market cap. Mining is a fiercely capital-intensive business. It’s essential I check how capable each company is to deploy new money to opportunities that cross its path.

Running the numbers

Based on the latest figures available, I worked out the ratios and found BHP to be the best-looking option.

Although Glencore has a slightly lower price/FCF ratio, its total debt as a proportion of tangible book value is much higher than BHP’s.

Of course, before buying BHP, I would like to do more research into its projects and the outlook for the commodities it is most heavily involved in mining. Potential risks of investing in BHP include commodity price volatility, operational risks, political and regulatory risks, and environmental and social risks.

This simple exercise gives me a jumping-off point. I can now rule out Antofagasta, for instance, as I am scared away by its negative free cash flow.

I will now focus my research on BHP, as well as Rio Tinto and Fresnillo, which all look to have strong balance sheets and to be priced cheaply compared to free cash flow.

The post This dirt-cheap FTSE 100 mining stock looks like a steal right now! appeared first on The Motley Fool UK.

BHP dividend forecasts

First, there are a couple of things to explain.

The first is that BHP’s financial year ends on 30 June. So, the year ending 30 June 2023 is ‘FY2023’. The following year is ‘FY2024’.

The second is that BHP reports its financials, and declares its dividends, in US dollars. So, all forecasts are in dollars. This is important to note because the GBP/USD exchange rate is quite volatile at the moment. In other words, the yield on offer today could be quite different to the yield when the dividends are actually paid if exchange rates fluctuate.

As for the forecasts, right now City analysts expect BHP to pay out $2.09 per share for FY2023 and $1.86 per share for FY2024.

These projected payouts are lower than the $3.25 paid last financial year. However, they still translate to very high yields. At today’s share price and exchange rate, the projected payout for FY2023 equates to a prospective yield of 8.3% while the estimated payout for FY2024 translates to a prospective yield of 7.4%.

Assuming that these dividend forecasts are accurate (analysts’ estimates can be way off the mark at times), BHP looks set to continue being a cash cow for investors.

Are BHP shares worth buying for income?

Would I buy BHP shares for the big dividends on offer? The answer to that question is actually no.

One reason I’d pass on BHP is that the stock is ‘cyclical’ (mining companies’ profits rise and fall depending on commodity prices) and, therefore, quite volatile. For example, between mid-2014 and early 2016, BHP’s share price fell from near 1,600p to near 500p. I don’t see the point of collecting a 8% yield if the share price can potentially fall around 70% like it did here. I’d need many years of dividends to make up for that kind of capital loss. I prefer dividend stocks that are a little more stable in nature.

Another issue for me is the fact that BHP tends to cut its dividend when business conditions are challenging. This is not ideal from an income-investing perspective. I prefer to invest in companies that consistently increase their dividend payouts year after year. I can rely on these kinds of businesses to provide me with a certain level of income.

So, while the yield here does look very attractive, I won’t be buying the shares for my portfolio any time soon. Ultimately, I’d prefer to invest in what I regard as ‘safer’ dividend stocks.

The post Here’s the BHP dividend forecast for 2022 to 2024 appeared first on The Motley Fool UK.

While high inflation expectations still abound, it would be ideal if my portfolio could yield a better income return. I know this is not the easiest ask across the FTSE 100 index, however. For example, its dividend yield stands at just 3.7%. Once I take into the account the current rate of UK inflation (10%), my real income return is -6.3%.

I invest to make more money, not less. So, which sector can offer me the best prospect of high, inflation-beating, long-term income?

Mining for high dividends

Two mining dividend stocks have caught my eye for the level of income they have been paying investors this year. They are BHP Group (LSE:BHP) and Rio Tinto (LSE:RIO).

In BHP’s case, the Anglo-Australian mining company has form with paying mammoth dividends. If I buy the shares now I will be in time to receive the next upcoming dividend payment. Analysts at Credit Suisse have predicted that BHP’s annual 2022 dividend yields could be as high as 16.2%, and 15.5% in 2023. I believe this indicates some great long-term prospects.

Though Rio Tinto has a higher current dividend yield than BHP (11.7%), I think this is due to the fact it enjoyed its highest interim profits ever reported during 2020 and 2021. So, it is likely I may have already missed the dividend gravy train. Particularly as iron ore, a key part of its business, has been falling in price.

Reliable income payer

BHP is known to pay high dividends when metal prices are up. But at the same time it is not afraid to cut back when commodities are doing less well. It consistently has a dividend coverage ratio of around 1.5 times or more. This strikes me as a reliable income payer over long periods of time, even amid market volatility.

The company’s payout ratio is much more consistent than that of Rio Tinto.

A dividend stock with capital upside

The common theme with these mining dividend stocks, is that their profits have been boosted by higher commodities price for metals in recent times. These factors have lifted their dividend payouts to investors.

I consider this to be a short-term phenomenon. Good short-term performance is not enough to justify inclusion in my portfolio. So, which of these stocks offer me the best value in the long run?

BHP Group, with a price-to-earnings (P/E) multiple of 4 times, is offering slightly more value than Rio Tinto (5.1 times). Both stocks look cheap to me when compared to copper miner, Antofagasta (15.7 times).

In this sense, I believe BHP, out of all the other mining stocks, looks like the best long horizon choice for me. It can offer me high, reliable income, above inflation, as well as the prospect of capital growth.

The post FTSE 100 dividend stocks yielding higher than inflation appeared first on The Motley Fool UK.