Copper prices have dropped 18% in recent weeks, creating a long-term opportunity to get in on some cheap copper-mining giants with generous dividend payouts. Their prospects will depend on a major technological transition: the move from gasoline-powered to electric vehicles.
“If you’re bullish on global growth over the next 18 to 24 months, you have to own copper-related assets, especially since current prices aren’t high enough to fund new-mine development,” says Adam Johnson, founder and author of the Bullseye Brief financial newsletter. “Longer term, and this is key, rising electric-vehicle production will shift the entire demand curve since EVs require multiple times the copper content of internal-combustion engines.”
Investors should consider buying shares of a handful of European-based miners: Rio Tinto (ticker: RIO), Glencore (GLEN.UK), and Anglo American (AAL.UK). All are diversified, but they’re also among the largest copper miners. Better yet, they have hefty dividends of 5%, 5.1%, and 4.7%, respectively.
The stocks are cheap relative to the main U.S. rival, Freeport-McMoRan (FCX), which trades at almost 14 times next year’s earnings and has a measly 1.8% dividend. Rio Tinto shares trade at a P/E around 11; Glencore’s and Anglo American’s at less than 10.
And Rio Tinto announced a $3.2 billion share buyback earlier this month. That news “reinforces our positive view of Rio’s capital returns potential,” said a recent report from U.K. broker J.P. Morgan Cazenove.
For the rest of this article: https://www.barrons.com/articles/as-e-cars-surge-some-major-copper-mining-stocks-should-rise-1541173787