Glencore shares reach 52-week highs 

The Glencore share price rocketed by 21% over the past month (it’s also up nearly 50% in five years) and currently trades at 511p. The Anglo-Swiss conglomerate is one of the world’s largest commodity businesses, spanning the precious metals and energy markets, with around 150 mining, metallurgical, and oil production assets to its name. 

Some economists are heralding the arrival of a commodities bull market and in February, Glencore reported record earnings of $21.32bn and net profits of $4.97bn for 2021. With this in mind, I’ll examine Glencore’s exposure to different commodities and what I think this means for the Glencore share price.  

Metals 

Glencore’s metals business is primarily focussed on copper, cobalt, zinc, nickel and ferroalloys. It’s a different investment prospect to beaten-up gold mining stocks with significant Russian operations, such as Polymetal International and Petropavlovsk. 

Glencore can benefit from rising demand for electric vehicles, which rely on nickel and cobalt as materials for battery production. These metals saw price increases of 161% and 57% respectively from last year. At current prices, nickel would comprise 12% of Glencore’s EBITDA. 

However, reports that Beijing is mulling a rescue deal for Tsingshan Holding Group, the company behind nickel’s big short, could send prices tumbling. Although Glencore is diversified across different metals, it’s not just nickel that has experienced extreme volatility in recent weeks. I expect further volatility ahead in metals markets and, by extension, in the Glencore share price.

Energy

Glencore’s energy business is centred on coal production and marketing crude oil and natural gas. Coal prices recently hit a 200-year high. Oil and gas have made similar although less dramatic gains.

North America and Europe are keen to transition away from fossil fuels to green energy sources. This may dampen the long-term case for Glencore shares.

However, demand for these commodities remains strong in Asia, with China, India and Japan making up the largest coal importers. I believe headwinds for the Glencore share price from government climate policies will likely take a long time to materialise. 

Wheat

Russia and Ukraine collectively account for nearly 30% of global wheat exports. Glencore is one of the world’s largest wheat traders. Although the stunning rally in wheat prices has boosted Glencore stock, the company recently condemned Russian military action in Ukraine and announced a review of its activities in Russia.

The longer-term consequences of the war for Glencore’s wheat trading business are far from certain. 

Where next for the Glencore share price? 

Predicting Vladimir Putin’s next move in Ukraine is difficult, but geopolitical stability seems unlikely to arrive soon. For me, this creates bullish conditions for commodities and Glencore stock is a good buy for me at its current price, despite reaching new highs. I believe the Glencore share price may carve a path to 600p in the months ahead, although it may be a bumpy ride. 

The post Commodities chaos: can the Glencore share price hit 600p? appeared first on The Twelfth Magpie.

More reading

• Down 10% to below £6 now! Here’s why Glencore’s share price looks a bargain to me anywhere under £12.13
• Warren Buffett warns on valuations — is market cap-to-GDP flashing a bubble signal again?
• 2 FTSE 100 dividend stocks that stand out for shareholder returns
• Up over 100%, are these FTSE 100 names still among the top stocks to buy?
• Up 103% with a P/E of 261 — is this FTSE 100 stock still worth buying?

Charlie Carman 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.

Against this backdrop, I think it’s time for investors to diversify outside of the UK. That means looking for high-quality dividend growth stocks with an international presence, mostly unaffected by whatever happens in December.

Global giant

One company that ticks all of these boxes is integrated commodities producer Glencore (LSE: GLEN). I don’t think it’s unreasonable to say Glencore is a critical component of the global economy. It owns the largest commodities trading operation in the world, with millions of tons of produce, such as oil, coal, copper, grain, cotton and sugar passing through its operations every day.

The chances you’re using a commodity that has gone through Glencore’s supply chain at this very moment. In other words, the company is an essential part of the global economy and, as long as that global economy continues to grow, its profits should as well.

Apart from being listed in London, Glencore has very little exposure to the UK economy, which makes it the perfect stock for any investors who want to limit their exposure to the country’s messy political scene and economic uncertainty.

Undervalued

As my Foolish colleague T Sligo recently pointed out, shares in Glencore look attractive at current levels. Due to trade tensions, investors have been selling the stock of late but, after these declines, its shares are dealing at a forward P/E of just 12.2. On top of this, investors can look forward to a 5.5% dividend yield.

As well as Glencore’s international diversification and position in the global economy, I also like the fact investors are buying into the company alongside management.

CEO and founder Ivan Glasenberg owns 9% of the business so, if the share price drops, he feels the same pain as every other investor. Such a significant ownership stake incentivises the CEO to prioritise shareholder returns and make the right decisions for the company for the long term, rather than taking shortcuts to please the City.

Some problems

Having said all of the above, the enterprise isn’t without its challenges. Glencore has invested billions in Africa, building its market share in commodities such as cobalt, nickel and copper, which should see a boom in demand as the move towards electrified transport accelerates.

However, so far, these new projects have not lived up to expectations. The group has struggled with rising losses and even the deaths of 40 miners who illegally invaded one of its cobalt mines in the Democratic Republic of Congo earlier this year.

These issues are concerning but, from a long term perspective, Glencore seems to be heading in the right direction. Cobalt demand has jumped 30% over the last four years as the market for electric vehicle batteries has accelerated rapidly. This trend is set to continue.

As one of the world’s largest cobalt producers, Glencore is almost certainly set to benefit from this growth. That’s why I think it could be time to buy this FTSE Brexit-proof dividend growth stock.  

The post Why I think it could be time to buy this FTSE 100 Brexit-proof dividend growth stock appeared first on The Twelfth Magpie.

More reading

• Down 10% to below £6 now! Here’s why Glencore’s share price looks a bargain to me anywhere under £12.13
• Warren Buffett warns on valuations — is market cap-to-GDP flashing a bubble signal again?
• 2 FTSE 100 dividend stocks that stand out for shareholder returns
• Up over 100%, are these FTSE 100 names still among the top stocks to buy?
• Up 103% with a P/E of 261 — is this FTSE 100 stock still worth buying?

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.

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 Twelfth Magpie.

More reading

• Down 10% to below £6 now! Here’s why Glencore’s share price looks a bargain to me anywhere under £12.13
• Warren Buffett warns on valuations — is market cap-to-GDP flashing a bubble signal again?
• 2 FTSE 100 dividend stocks that stand out for shareholder returns
• Up over 100%, are these FTSE 100 names still among the top stocks to buy?
• Up 103% with a P/E of 261 — is this FTSE 100 stock still worth buying?

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.

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 Twelfth Magpie.

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• Down 10% to below £6 now! Here’s why Glencore’s share price looks a bargain to me anywhere under £12.13
• Warren Buffett warns on valuations — is market cap-to-GDP flashing a bubble signal again?
• 2 FTSE 100 dividend stocks that stand out for shareholder returns
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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.

If you are looking for a better return on your money, I highly recommend buying a basket of FTSE 100 income stocks. Right now, there’s a range of blue-chip income stocks that offer dividend yields of 5% or more, which puts the Cash ISA to shame.

Companies like the world’s largest advertising group, WPP (LSE: WPP).

Working through the problems 

Shares in this advertising and marketing conglomerate have fallen around 50% over the past two years as investors have grown wary about the group’s prospects. City brokers also seem to have an overwhelmingly negative opinion of the company. At the time of writing, of the 27 brokers who currently cover the stock, only five (or 14%) give it a ‘buy’ rating. 

After earnings declined by a quarter in 2018, analysts are expecting the group’s profits to contract further this year as it struggles to compete against online marketing oligopoly Facebook and Google.

However, management is taking action to try and stabilise the business, including selling off non-core businesses and minority ownership stakes in other marketing agencies. For example, it recently sold its stake in post-production company The Farm, as well as Chime. The City also expects WPP will announce the long-awaited sale of its Kantar unit in the next few weeks. Analysts believe this business could be worth as much as $4bn.

These transactions tell me that while WPP’s earnings might be falling, the company’s financial position is only improving. That’s good news for the firm’s dividend prospects.

Analysts believe the business will distribute 60p per share to investors this year, giving a dividend yield of 5.9% on the current share price. Even after factoring in the decline in earnings, this distribution will be covered 1.7 times by earnings per share. A possible $4bn cash infusion implies there might be special dividends on the horizon for investors as well.

International cash generation

Another blue-chip income stock I think could be a good substitute for a Cash ISA is mining and commodity trading giant Glencore (LSE: GLEN).

There are two main reasons why I believe Glencore is one of the most attractive income stocks in the FTSE 100. First of all, the group’s managers and employees own a significant number of the company’s outstanding shares, which implies they are highly incentivised to return as much cash as possible to shareholders. 

And secondly, Glencore is one of the world’s largest integrated producers and marketers of commodities making it a relatively essential part of the global economy. As the global economy continues to expand, the group’s earnings in cash generation should continue to grow as well.

City analysts expect the firm to generate as much as $4.6bn of net profit this year and $5.5bn in 2020, most of which will be returned to shareholders if past trends are anything to go by. Indeed, last year, the company returned all of its net profit of $3.4bn and more to shareholders (buybacks and dividends for the year totalled around $5bn).

Considering its history of returning cash to investors and a 5.5% dividend yield, I think this stock is certainly worth tucking away in your income portfolio.

The post Forget the cash ISA. I like these two FTSE 100 stocks that yield nearly 6%! appeared first on The Twelfth Magpie.

More reading

• Down 10% to below £6 now! Here’s why Glencore’s share price looks a bargain to me anywhere under £12.13
• Warren Buffett warns on valuations — is market cap-to-GDP flashing a bubble signal again?
• 2 FTSE 100 dividend stocks that stand out for shareholder returns
• Up over 100%, are these FTSE 100 names still among the top stocks to buy?
• Up 103% with a P/E of 261 — is this FTSE 100 stock still worth buying?

Rupert Hargreaves owns no share mentioned. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. The Motley Fool UK owns shares of and has recommended Alphabet (C shares) and Facebook. 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.

So, if you’ve just begun your investing journey, and don’t know where to start, here are two stocks that I think would make great additions to any starter portfolio. 

The new oil 

Data is the 21st-century economy’s oil, and Experian (LSE: EXPN) is one of the largest data managers in the world. The company, which is best known for its credit rating services, gathers, analyses and distributes data for customers and clients all over the world and has built a reputation for being one of the best in the data business. This reputation is critical in a world where customers are becoming increasingly concerned about who has access to their data and what it is being used for. 

Experian’s data skills are so impressive that City analysts believe new rules on how data is handled will actually benefit the company. For example, following the introduction of new regulations regarding the processing of data in Brazil earlier this year, analysts at investment bank Credit Suisse announced they believe the changes will drive double-digit margin growth in the region for “the foreseeable future,” as Experian takes market share from weaker competitors. 

Considering its market-leading position, I think Experian’s earnings will continue to grow for many years to come, and while shares in the firm might be a tad pricy (they’re dealing at a forward P/E of 28.6) I’m happy to pay a premium to take part in Experian’s global growth story. The stock also supports a dividend yield of 1.8% at the time of writing. 

Investing with management 

My second FTSE 100 pick for a starter portfolio is Glencore (LSE: GLEN). There are two main reasons why I like this company. Firstly, it is one of the world’s leading commodity trading houses. The firm trades everything from coal, oil and gas, to grain, sugar and copper. There’s a good chance you will come into contact with a commodity that’s passed through Glencore’s operations every day.

As the world’s economy continues to grow, demand for commodities will only expand, and that means Glencore’s sales will only expand. At the same time, this company is still majority owned by its founders and managers. This tells me that management has shareholders’ interests in mind, as the decisions they make about the direction of the business will have an impact on their wealth as well as the wealth of outside investors. 

With these two positive tailwinds behind the company, I think it is worth taking advantage of today’s attractive valuation to snap up shares in Glencore. At the time of writing the stock is trading at an attractive P/E of just 10.2 and supports a dividend yield of 5.3%.

The post Investing for the first time? 2 FTSE 100 stocks I’d buy with £2k appeared first on The Twelfth Magpie.

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• Down 10% to below £6 now! Here’s why Glencore’s share price looks a bargain to me anywhere under £12.13
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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Experian. 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.

Over the past five years, Prudential has been on a growth spurt. The company, which is synonymous with life insurance in the UK, has shifted its attention to Asia, where management sees much more potential for growth. 

This shift has yielded fantastic results. Analysts are expecting the company to report earnings per share of 159p in 2019, up 59% from 2015’s figure of 101p.

As earnings have grown, dividends have also ticked higher. The per share distribution to investors has increased at a compound annual rate of 10% over the past six years and, today, the stock yields 3.5%. That isn’t particularly attractive compared to the market average of 4.7%, but if the distribution continues to grow as it has done in the past, investors buying today can look forward to a yield on their original investment of 7% by 2025.

Shares in this income and growth champion are changing hands today for just 10.6 times forward earnings, a valuation that I think is too good to pass up.

Global giant

Another company I would invest in is mining giant Glencore (LSE: GLEN). As the world’s largest commodities trader, Glencore has become an integral part of the global economy and I don’t see this changing anytime soon.

Even though the company is being attacked for its stance on coal mining and involvement with some curious characters in the business world, I think the group’s long-term outlook is bright because the world’s demand for key commodities such as copper and rare earth metals is only increasing.

As well as favourable economic tailwinds, I think Glencore also makes a great investment because its CEO and founder Ivan Glasenberg remains the company’s largest shareholder… so it’s in his best interests to always act with shareholders in mind.

Today, you can snap up shares in this global commodities behemoth for just 10.5 times forward earnings. The stock also supports a dividend yield of 5.1%, and analysts expect this yield to hit 5.7% by 2020.

Best of the best

Sticking with the global leader theme, the final stock I’m going to profile is Rolls-Royce (LSE: RR). 

Once the poster child of the UK manufacturing industry, Rolls-Royce’s star has fallen over the past few years as the group has struggled to deal with some serious operational and manufacturing issues. However despite these issues, the company remains one of the biggest manufacturers of jet engines in the world (the market is dominated by only two companies, Rolls-Royce and General Electric).

And after years of restructuring, analysts are finally expecting the firm’s efforts to pay off in 2019. The City believes the company can earn £471m in 2019, followed by £706m in 2020, which translates into earnings per share of 26p and 39p for each year, respectively. These forecasts put the shares on a forward P/E of 34 for 2019, which isn’t particularly cheap. Still, considering Rolls’ strong brand value and projected growth over the next two years, I think it is worth paying this premium to get your hands on the shares.

The post 3 FTSE 100 stocks I’d buy with my last £3k appeared first on The Twelfth Magpie.

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

Away from home

A disorderly Brexit might throw the UK economy into turmoil, but no matter how widespread the fallout, FTSE 100 member Rentokil Initial (LSE: RTO) is unlikely to see a significant drop off in business.

Specialising in pest control and hygiene products, Rentokil is, in my opinion, one of the FTSE 100’s most defensive stocks. Rodents don’t take time off — no matter how poorly the rest of the economy is faring.

What’s more, only around 10% of the company’s revenue comes from the UK. The firm also has operations in North America, Europe, Asia and the Pacific region. It’s been growing steadily in these regions by acquiring smaller businesses that offer good growth potential, using a mix of cash flow from operations and debt, buying from owner-operators, and then using its experience to reduce costs and improve sales.

So far, this strategy has been highly effective. Net profit has jumped four-fold over the past five years, and the dividend has increased by more than 100%. 

As long as the business doesn’t overstretch itself, I see no reason why this trend cannot continue. There’s still plenty of smaller operators out there to merge into the larger group, which should support revenue growth for many years to come. Indeed, the company acquired 16 new bolt-on businesses in the third quarter alone.

Granted, shares in Rentokil aren’t cheap — they’re currently changing hands for 22.5 times forward earnings — but considering the group’s future potential and international diversification, I reckon the stock deserves this premium multiple.

Focus on emerging markets

Rodents don’t take off, and neither does commodities trader Glencore (LSE: GLEN). No matter what happens to the UK after Brexit, this business, which also has operations around the world, is unlikely to see any significant impact on its performance.

Glencore is a unique business in the commodities world. It’s the world’s largest trader of commodities, such as grain and oil, but it’s also a significant producer of commodities, such as coal, copper, nickel and cobalt. The last two of these are vital components in the battery packs of electric vehicles, which will act as a hedge against falling demand for coal. 

Glencore doesn’t expect the demand for coal to tail off anytime soon, either. In a recent presentation, the company told investors an extra 1bn tonnes of coal fired-power capacity was currently under construction around the world, underpinning demand for as much as 250m in additional coal production over next five years.

With the UK committed to phasing out dirty fuels such as coal, it’s difficult to think of this as a growth business for Glencore, but that’s what management seems to believe. It also means the company is highly insulated from Brexit fallout. A dividend yield of 5.9% only sweetens the attraction, in my opinion.

Glencore might not be everyone’s cup of tea, but this global commodities trader is, in my view, one of the most Brexit-proof stocks in the FTSE 100.

The post Alert: Time could be running out to buy these Brexit-proof FTSE 100 stocks appeared first on The Twelfth Magpie.

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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.

Its quick thinking has stabilised the ship and, today, the business is, in my opinion, one of the best income stocks in the FTSE 100.

Blue chip income

The primary reason why BHP has become a leading income play in my eyes is the company’s cash generation. By slashing costs and investing in productivity rather than new, expensive capital projects, management has pushed costs down, production up, and margins have expanded.

The firm’s results for the year to the end of June show clearly just how far the company has come in a few years. Free cash flow for the period totalled $12.5bn and operating cash flow came in at $18.5bn. Considering these numbers, it’s no surprise the stock has outperformed the FTSE 100 by 24%, excluding dividends, over the past 12 months. 

Alongside the full-year results, the board affirmed a record final dividend of $0.63 per share and the company is also promising to return any proceeds received from the sale of its US onshore oil assets (sale price $10.8bn) to investors. On the debt front at the end of June, BHP’s net debt had fallen to just $10.9bn, down a staggering $15bn in two years.

Any business that can both slash net debt by more than 50% while at the same time investing in operations and paying out billions to investors is worth a second look in my opinion.

But what does the future hold for the company’s distribution to shareholders? Well, analysts believe the payout will rise 11% to a new record of $1.31 (101p) for 2018, giving a dividend yield of just under 6%. This is excluding any additional capital return from the $10.8bn oil asset sale. If management does decide to return all of this cash to investors, according to my figures, the special dividend will be equivalent to 9% of the stock’s current market value. 

All in all, this income champion certainly looks as if it deserves further research.

Cheap income 

The fortunes of BHP’s peer, Glencore (LSE: GLEN), have also improved since the company’s shares plunged to an all-time low at the beginning of 2016. Quick thinking by management helped stabilise the group’s balance sheet and recovering commodity prices have acted as a tailwind for growth. 

After plunging to a loss of $5bn in 2015, analysts are forecasting a net profit figure of $7.2bn by 2018, giving earnings per share of 37p. At this level, the stock is trading at a forward P/E of 8.8.

And when it comes to dividend growth, Glencore is a much more attractive proposition than its larger peer. Analysts estimate the full-year payout will jump 109% in 2018, giving a prospective dividend yield of 4.8%. Further growth is expected for 2019. Analysts have the yield rising to 5.3% next year.

Dividends are only part of the shareholder return proposition with Glencore. The company is also returning cash to investors via share buybacks. When you include these in the total yield — the total per share sum of both dividend income and buybacks, which acts as a proxy for total shareholder return — Glencore’s total yield is currently 5% and could, according to my calculations, hit 6% next year.

The post Forget the State Pension, this surging FTSE 100 share could boost your retirement income appeared first on The Twelfth Magpie.

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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.

Unfortunately, this was just the start. Over the next six months, to the end of January 2016, the stock cratered a further 65%. A dividend cut, then rights issue only added to the pain. However, since reaching the low in January 2016, the Glencore share price has undergone a miraculous recovery. 

Today the company is undoubtedly one of the FTSE 100’s top income and growth stocks. But considering the commodity trader’s rocky past, should you buy the shares? 

A miraculous turnaround 

Since 2016, Glencore’s management has helped restore investor confidence by aggressively reducing debt and selling off assets. Higher commodity prices have also supported the business. 

Today the group released its numbers for the first half of 2018, which clearly show how far the firm has come over the past two-and-a-half years. Adjusted earnings before interest, tax, depreciation and amortisation jumped 23% year-on-year to a record $8.3bn. Revenue was $108.5bn, against $100bn a year earlier. Net debt dropped to $9bn, from $10.7bn in the same period last year. 

Adjusted EBITDA came in slightly below the City’s target of $8.5bn because the company struggled to sell 32,000 tonnes of copper. Management is confident it should be able to find buyers for this inventory in the second half. 

With profits booming, Glencore’s management, led by Ivan Glasenberg (its founder and majority shareholder) is shifting its focus from growth towards shareholder returns. So far this year, the company has announced $4.2bn of cash payouts and stock repurchases, equivalent to 29 US cents per share. 

According to my numbers, at the current rate of exchange, $0.292 is equal to 22.5p per share. Including debt reduction of $1.7bn or 9p per share, Glencore’s current shareholder yield is 9.7%. The shareholder yield captures the three ways of returning company cash to investors: debt paydown, share buybacks, and dividends. 

And as the company exits recovery mode, I believe these healthy cash returns are set to continue, making Glencore, to my mind, one of the best investments in the FTSE 100. 

Cash bonanza 

Glencore isn’t the only miner chucking off cash. Iron ore giant Rio Tinto (LSE: RIO) also recently announced a record cash return to investors after several years of restructuring. Earlier this month, the company announced a $7bn cash windfall for investors. Rio plans to pay a record interim dividend of $2.2bn and add $1bn to its share buyback programme. Also, management is looking to return $4bn of asset sale proceeds to shareholders. 

Even though the targeted $7bn cash return is a colossal figure, it pales in comparison to last year’s total distribution of $10bn, which amounted to 50% of shareholder returns for the entire mining sector. 

Figures compiled by the Financial Times show that since 2013, Rio has returned $35.5bn to shareholders or 36% of its current equity market value. With the group targeting a further $5bn in efficiency savings from operations, and iron ore prices stabilising, it looks as if this trend can continue.

Based on the current dividend projections, shares in Rio yield 5.8%. The stock trades at a forward P/E of 10.6.

The post Should you buy the Glencore share price for its massive 10% shareholder yield? appeared first on The Twelfth Magpie.

More reading

• Down 10% to below £6 now! Here’s why Glencore’s share price looks a bargain to me anywhere under £12.13
• Warren Buffett warns on valuations — is market cap-to-GDP flashing a bubble signal again?
• 2 FTSE 100 dividend stocks that stand out for shareholder returns
• The only FTSE 100 stock I own right now
• Up over 100%, are these FTSE 100 names still among the top stocks to buy?

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.