As the world moves toward a net-zero carbon economy, demand for raw materials from the metals and mining industries is expected to skyrocket. Raw materials will be at the forefront of decarbonization efforts and electrification as economies transition from fossil fuels to wind and solar power generation, battery-powered and fuel-cell-based electric vehicles (EVs), and hydrogen production.
Since rising inflation and surging COVID-19 cases continue to spook investors, the market is expected to remain turbulent in the near term. However, high dividend-paying stocks could be ideal bets in times of market volatility to ensure a steady income stream.
Thus, we think it could be wise to bet now on fundamentally sound mining stocks BHP Group (BHP – Get Rating) and Rio Tinto Group (RIO – Get Rating). They are currently yielding more than 8% and are trading at discounted valuations.
Headquartered in Melbourne, Australia, BHP explores for, develops, and produces oil and gas properties, and mines for copper, silver, zinc, molybdenum, uranium, gold, iron ore, and metallurgical and energy coal internationally. Petroleum; Copper; Iron Ore; and Coal are the company’s operational segments.
BHP’s profit from operations increased 80% year-over-year to $25.91 billion for the year ended June 30, 2021. Its net operating cash flow grew 73% from its year-ago value to $27.23 billion. And the company’s underlying EBITDA surged 69% from the prior-year period to $37.38 billion.
The stock has gained 20.8% in price over the past three months and 16.4% over the past month.
BHP’s $6.02 annual dividend yields 8.97% on its current stock price. On September 21, the company paid a $4 quarterly dividend. It has a four-year average dividend yield of 6.3%.
In terms of forward EV/EBIT, BHP’s 5.70x is 55.9% lower than the 12.93x industry average. In addition, its 11.07x non-GAAP forward P/E is 28.2% lower than the 15.42x industry average.
BHP’s POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
BHP is also rated B for Growth and Quality. Within the Industrial – Metals industry, it is ranked #3 of 35 stocks. To see additional POWR Ratings for Stability, Value, Momentum, and Sentiment for BHP, click here.
RIO is a London-based global mineral resource exploration, mining, and processing company. The company’s product portfolio includes aluminum, copper, diamonds, gold, borates, titanium dioxide, salt, iron ore, and uranium. In addition, it owns and operates open pit and underground mines, mills, refineries, smelters, power stations, and research and service facilities.
This month, RIO has agreed to purchase four battery-electric trains in Western Australia’s Pilbara area as part of its strategy to reduce carbon emissions by 50% by 2030.
Last month, RIO agreed to…
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