Income stocks are a great way to protect my portfolio against rising inflation. With it currently sitting at over 9% in the UK for May, the situation across the pond isn’t faring much better. Yesterday the US saw rates spike to a 40-year high.

With rising inflation meaning volatility is running rife, I’m on the lookout for stocks with healthy dividend yields to put my money to work. Here are two I’ve got my eye on.

Lloyds

My first pick is FTSE 100 constituent Lloyds (LSE: LLOY).

The stock’s current dividend yield is an attractive 4.77%, which sits firmly above the FTSE 100 average. This isn’t inflation-beating, but it’s most certainly more rewarding than keeping my cash in the bank.

There are other reasons to pick Lloyds too. I like the bank’s low valuation. With a price-to-earnings (P/E) ratio of 5.6, this falls well within the ‘value’ benchmark of 10. And compared to its peers, Lloyds also looks cheap. For example, HSBC currently trades on a P/E of 11.

Hiking interest rates could see the firm suffer if its customers default on their loans. Yet on the other hand, higher rates will also allow Lloyds to charge borrowers more when lending. Interest rates were recently set at 1.25%. And with another review scheduled for August, there have been hints of a 0.5% hike. It could benefit from this.

Lloyds is also the UK’s largest mortgage lender. With loans for properties accounting for over two-thirds of its lending, the business may see a slowdown in growth for the foreseeable future as the booming housing market hits the brakes. However, I still think it would be a strong addition to my portfolio.

Rio Tinto

I also like the look of Rio Tinto (LSE: RIO). With an impressive dividend yield of 12.1%, this trumps that of Lloyds. It also beats the UK inflation rate, offsetting the possibility of my cash eroding.

It’s the second-largest mining company in the world, and it currently trades for around £47 per share.

Just like Lloyds, the stock looks cheap. It has a 4.4 P/E, considerably lesser than that of competitor Glencore (13.3).

On top of this, it also had £1.6bn of net cash, according to its 2021 full-year report, so the firm is in a healthy financial position to pay dividends.

It will also benefit from the large investments we’re set to see in the renewable energy sector. Electric vehicles and their charging infrastructure, along with renewable energy power plants, will see a rise in the long-term demand for iron. The business has also been increasing its stake in mining lithium – including the recent purchase of Rincon lithium project.

It does, however, faces headwinds, as ongoing Covid concerns continue to plague China. Demand for iron ore may wane in the months ahead. China accounts for around half of global steel output, and iron ore is a key material, meaning Rio Tinto may suffer.

However, with its low valuation and strong long-term outlook, I’d buy the stock today.

The post 2 income stocks I’d buy today! appeared first on The Twelfth Magpie.

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Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has recommended HSBC Holdings and Lloyds Banking 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.

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.

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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.

As we draw to the end of another, shall we say, ‘interesting’ year on the markets, the masochist in me always makes a point of looking to see what stocks I really should have bought at the beginning of 2021. Here are three from the FTSE 100.

Croda International

Consumer Care and Life Sciences company Croda International (LSE: CRDA) has gained 51% in value in the year to Christmas Eve. That makes the stellar 12% rise in the FTSE 100 look almost pedestrian. Much of this momentum has been due to the company managing to exceed analyst expectations on profit over the year. The question is, can this continue?

I’m certainly optimistic. Having now agreed to sell the majority of its Performance Technologies and Industrial Chemicals businesses, Croda intends to move into “faster growth areas” such as healthcare and become a leader in the cropcare market. These moves, according to CEO Steve Foots, will see the company generate “consistent sales growth and an even stronger profit margin”.

The only problem is that Croda now trades on a punchy valuation of 39 times forecast FY22 earnings. As such, I’d be very surprised if the company manages to replicate 2021’s gains.

Nevertheless, this remains a great stock, in my opinion. If I were looking to build a FTSE 100-focused portfolio for the long term, CRDA would easily make the shortlist. One to buy on dips perhaps?

Glencore

Next up is mining and commodities trader Glencore (LSE: GLEN). Its shares have climbed 52% in 2021, so far. Again, this is evidence that picking your own stocks has at least the potential to vastly outperform the market. It also shows that winners can come from multiple, very different sectors.

Glencore’s streak can be attributed to the growing demand for commodities like copper and, more recently, oil. In fact, the company’s interest in the former could continue to be very lucrative in the years ahead as the adoption of electric vehicles and renewable energy gathers pace.

Of course, one issue with Glencore is that its fortunes are, to some extent, beyond its control. Commodity prices can quickly reverse and this leaves me skeptical that the stock will repeat this year’s performance in 2022.

Then again, it might be argued that the potential income on offer more than makes up for this. A 6.8% yield for FY22 is currently forecast. Shares also trade at just 7 times earnings. 

Ashtead

A final FTSE 100 stock that’s done the business for holders in 2021 has been equipment hire business Ashtead (LSE: AHT). Its value has climbed a stonking 72% year to date as rental revenues have soared to record levels.

Naturally, such a run of form could lead to some profit-taking in 2022. The seemingly never-ending pandemic could also cause a slowdown in trading if projects end up being delayed due to safety concerns. However, a forward P/E (price-to-earnings) ratio of 25 doesn’t feel excessive, given the consistently high margins Ashtead achieves.

The outlook is bullish too. With the construction industry in rude health following a post-lockdown rise in demand (not to mention Joe Biden’s infrastructure bill), I don’t doubt the good times can continue for the £27bn-cap.

Another 72% next year? Probably not. However, this is another stock worth keeping in the bottom drawer, in my opinion.

The post 3 FTSE 100 stocks I wish I’d bought in 2021 appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Croda International. 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 commodities and natural resources sector has been the year’s top performer, with an average return of 116%, according to the Association of Investment Companies. This sector is famously cyclical, and that remains the case today. In the previous two years, it posted negative returns. The danger with buying these two FTSE 100 stocks is that the big gains have been made.

Mining stocks have been flying as investors anticipate a surge in demand once Covid vaccines do their work. They can also act as a hedge against inflation, as commodity prices tend to rise when prices generally are accelerating.

Green light for commodity stocks

US president Joe Biden’s $2trn infrastructure plan should boost demand for raw materials, while the 18.3% rise in Chinese GDP is a further positive sign. The green revolution should boost demand for copper, which is now trading near all-time highs.

Anglo American should benefit from its broad portfolio of materials. It is the world’s largest producer of platinum, but also mines diamonds, copper, nickel, iron ore and metallurgical and thermal coal.

That helped make it the best-performing FTSE 100 mining stock over five years, up 365% in that time, easily beating Glencore’s 91% five-year return. It has been generating plenty of cash, which has allowed it to pay off $2bn of net debt, reducing it to $5.6bn. 

Anglo American aims to pay out 40% of profits to shareholders, and recently lifted its net dividend by 53% to 72 cents a share. Right now, it yields 2.32%, but that is forecast to rise. My major concern is that rivals Rio Tinto and BHP Group could now outperform, as they will benefit more from surging Chinese demand for iron ore and copper, key components for electric vehicles. Anglo American owns De Beers, but diamond sales have been falling.

I’d buy these FTSE 100 stocks today

Glencore also offers diversification, mining copper, cobalt, nickel, zinc and lead, aluminium, iron ore, gold and silver and crude oil. It has the largest exposure to base metals and copper of all the London-listed miners, totalling 40% of EBITDA earnings.

The Glencore share price has been more volatile. Net debt hit $30bn in 2015, forcing it to shelve dividends, sell assets and raise fresh equity. It has now reduced that dizzying total to $15.84bn. That’s within its $10bn to $16bn target range, allowing it to resume its dividend. The yield is 2.66%. That should rise.

My biggest concern is that these FTSE 100 stocks no longer look undervalued, trading at 17.2 and 27.9 times earnings respectively. If the recovery flounders, they will too. However, if they meet earnings expectations, all should be well as they trade at forward valuations of just 7.1 and 9.7 times earnings. I’d buy them today.

The post These 2 FTSE 100 stocks have doubled in a year! I’d still buy them appeared first on The Twelfth Magpie.

More reading

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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.

Commodity stocks are leading the FTSE 100 today, with Glencore (LSE: GLEN) up 3.8% and Anglo American (LSE: AAL) rising 3.1%. Of course, one day’s growth proves nothing. What matters is what happens over 10 or 20 years or longer. That’s my investment time scale. Over such a lengthy term, I expect both Glencore and Anglo American to be among the best shares to buy for both share price growth and dividend income.

Recent performance has been astonishing. Both stocks have doubled over the last year, despite the pandemic. Investors have been positioning themselves for the recovery, ever since last November’s vaccine breakthrough. China remains the prime source of demand for metals and minerals, and its economy is recovering fastest. The shift towards electric cars is also driving demand for iron ore and copper, the latter of which has just hit a 10-year high of more than $9,000 a tonne.

I’d buy these 2 FTSE 100 stocks

Despite recent strong share price growth, Glencore and Anglo American continue to look cheap today. Glencore trades at 10.6 times forecast earnings, while Anglo American trades at just 7 times earnings. From the valuation point of view, these look like some of the best shares to buy today.

This is pricing in a lot of growth over the next year, though. If the recovery flounders and commodity demand slumps, both stocks could disappoint. The sector is famously cyclical, and we need further evidence of a global rebound for them to climb higher.

Right now, this is in the balance, due to vaccine delays and mutant Covid strains. Personally, I remain optimistic. Even if lockdowns drag on, I think Glencore and Anglo American will fly in the longer run. My lengthy investment timeframe gives them plenty of opportunity to do so.

As well as growth, these are attractive income stocks. Glencore recently resumed dividends and is now forecast to yield 4.1%, covered 2.3 times by earnings. Anglo American looks like one of the best shares to buy for income across the entire FTSE 100, with a forecast yield of 5.5% and cover of 2.5.

Two of the best shares to buy

The pandemic has taken its toll, of course. Glencore has seen revenues drop by a third but it has also cut net debt below $13bn, and is even considering a share buyback later this year.

Anglo American has been hit by by falling diamond sales, Covid-19 lockdowns in South Africa, and operational problems in its coal and platinum divisions. Despite that, profits have been better than expected and it has lifted its dividend.

Investing in the commodity sector can be very up and down, but I still think it contains some of the best shares to buy for income and growth. Glencore and Anglo American look like top ‘buy and hold’ stocks for my Stocks and Shares ISA allowance.

The post I think these FTSE 100 stocks are 2 of the best shares to buy for my ISA 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
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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.

Both are recovering from the Covid-19 crash in March, and could help you generate the capital growth and dividend income you need to build your long-term wealth.

FTSE 100 recovery stock

The Glencore (LSE: GLEN) share price has climbed a steady 20% in the last three months and today’s positive half-year production report suggests there could be more to come from this FTSE 100 stock.

The commodity sector has bounced back from the crash in March, amid hopes that China can lead the world out of the pandemic. Today, Glencore’s chief executive Ivan Glasenberg highlighted “an overall strong first-half operating performance amid the unprecedented challenges presented by Covid-19″.

The pandemic led to the temporary suspension of some of its operations, triggering a 15% decline in first-half coal production to 58.1m tonnes. Glencore’s marketing business has risen to the challenge by helping to deliver “robust counter-cyclical earnings”. Isn’t diversification lovely? As a result, Glencore has raised its full-year 2020 earnings expectations to the top end of its $2.2bn–$3.2bn guidance range. I wish more FTSE 100 stocks had such bullish prospects.

Glasenberg expects operating cash flow to remain solid, as it adapts to today’s unprecedented times, although net debt is up. Curtailed operations are now getting back to work. What Glencore needs now is a full-blooded global economic recovery, just like every other FTSE 100 stock. The decision on this year’s dividend has been suspended for now. We should know more in the third quarter. Fingers crossed!

The dividends will return

I’d also like to see insurer Aviva (LSE: AV) restore its dividend sooner rather than later. The FTSE 100 stock cut shareholder payouts at the peak of the crisis, when the banks were under direct pressure to do the same. Yet rival Legal & General Group felt able to stand by its payout.

While the Aviva share price has recovered slightly from the lows of March, progress has been tentative. It is up 10% in the last three months.

The pandemic has been hard on the group, which has had to pay a hefty number of claims during the lockdown, including for business interruption and travel insurance.

It still benefits from strong growth in bulk annuity sales, where it takes over the responsibility of running company pensions. Across the business, sales volumes looked set to be lower in the rest of the year, and it will struggle as people lose their jobs and businesses go under.

This FTSE 100 stock is incredibly cheap right now, trading at just six times forecast earnings. New CEO Amanda Blanc might just give this business the shake up it needs. Better still, the dividend will come back at some point, and can be generous after recent share price dips.

The Aviva share price still trades a third lower than this time last year. The recovery may take a little longer, so now could be a time to hop on board if you plan to hold for the long term.

By the time you retire, dividends from these two FTSE 100 stocks could be rolling in again.

The post I’d buy these 2 FTSE 100 stocks to get rich and retire early 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

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 well as being one of the largest mining businesses, the company is also one of the largest commodity traders. This means the group is responsible for getting commodities, such as iron ore, copper, coal and oil, from where they’re produced to the end consumer, a hugely complicated process that requires lots of planning and infrastructure.

There are only a handful of companies that are geared up to take on these challenges on such a large scale. Glencore is the biggest. 

As the global economy continues to expand, demand for Glencore’s services should only increase, and that’s why I’m recommending the stock as an income investment. Shares in the company currently support a dividend yield of 6.3% and trade at a forward P/E of 9.5 for 2020, based on current City estimates. 

Current projections suggest the dividend yield will be covered 1.8 x earnings per share next year. 

Special dividend

Another blue-chip stock yielding more than 5% that currently looks interesting as an investment is retailer Morrisons (LSE: MRW). A few years ago, the supermarket group was struggling. Morrisons, alongside the rest of the sector, was finding it tough to compete with the rise of the low-cost German discounters. While this threat hasn’t vanished, Morrisons has been able to win back customers by offering a better service at a similar price.

These efforts are now starting to pay off handsomely. The group reported stronger-than-expected profits for the six months to 4 August of £198m off the back of a 0.4% increase in total revenue.

Management was so pleased with these numbers, it decided to declare a special dividend of 2p per share. If this trend continues, City analysts believe shares in Morrisons will yield a total of 4.8% in its current financial year, rising to 5.1% for fiscal 2021.

With the payout covered 1.5 times by earnings per share as well, it looks to me as if management has plenty of room to increase the payout further from current levels as well. 

Undervalued income

The final FTSE 100 dividend stock I’m going to highlight is water supply United Utilities (LSE: UU). Threats from Labour leader Jeremy Corbyn to nationalise utility suppliers if he comes to power have weighed on the share prices of all utility companies over the past few years. However, I think there’s actually quite a small chance this will ever happen. Corbyn wants to nationalise utilities, but doing so would require the support of the courts as well as parliament, which he’s unlikely to have.

On this basis, I reckon it’s worth taking advantage of the negative market sentiment to snap up shares of undervalued utility companies.

Today, shares in United offer a dividend yield of 5.3%. The distribution is covered 1.4 times by earnings per share, so it looks as if it’s safe for the time being. Historically, the company’s dividend yield has averaged around 4.5%, which implies the stock is undervalued by nearly 18% at current levels. 

The post 3 FTSE 100 stocks with dividends over 5% I’d buy today 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.

One glaring exception to this is FTSE 100 firm Glencore (LSE: GLEN), which has fallen by 20% over the last five years — a period when the rival Rio Tinto (LSE: RIO) share price has risen by 45%.

As a natural value investor, I’ve been getting interested. Is now the time to buy Glencore?

Changing the guard

Critics say that its hard-driving trading ethos and big coal business makes Glencore a bit of a dinosaur. They also suggest that ongoing investigations into alleged corruption point to unacceptable standards of corporate governance.

I accept these points, but recent months have seen a number of chief executive Ivan Glasenberg’s closest lieutenants announce plans to retire. Mr Glasenberg himself has said he plans to leave in the next few years, once he’s chosen a successor.

The next generation of top management should be significantly younger, with a long runway ahead of them. I’d expect them to be just as commercially focused, but to have a renewed interest in creating lasting value. In my opinion, they will be keen to avoid a repeat of Glencore’s current legal issues, and are likely to place greater priority on environmental issues.

I’d expect this to lead to a decision to sell or gradually scale back the coal business. Looking further ahead, I think that the company’s substantial cobalt and copper assets should leave it well positioned to profit from growing demand driven by the shift to electric vehicles.

Still a cash machine?

My sums indicate that the company generated free cash flow of about £7.2bn in 2018. Based on the firm’s current market cap of about £38bn, that values the shares at 5.2 times underlying free cash flow. That’s pretty cheap, in my view, and points to the group’s strong cash generation.

One downside of Glencore’s trading-focused business model is that it needs more debt to operate than rival mining groups. However, the company has proved well able to manage this during difficult periods.

Looking ahead, GLEN shares are trading on less than 10 times 2019 forecast earnings, with an expected dividend yield of 5.6%. That could be a decent entry point, in my opinion.

A safer choice?

In contrast to Glencore, Anglo-Australian Rio Tinto mining group ended last year with net cash on its balance sheet. The firm — which makes most of its money from iron ore — paid dividends totalling $9.3bn, or 550 cents per share (c.430p) for 2018. That includes a $4bn payout reflecting cash received from asset sales, including its remaining coal operations.

Last year could turn out to have been a record year for profits too. Rio reported an after-tax profit of $13.6bn for the period. Analysts are forecasting a figure of about $10.5bn for 2019, and $9.1bn for 2020.

These estimates may change — they’ve risen by about 10% in the last three months alone. However, I think it’s worth viewing last year’s performance as a possible peak.

For this reason, the stock’s 2019 forecast price/earnings ratio of 9.2 and dividend yield of 6.2% may not be quite as cheap as they seem.

In my view, the Rio share price looks fair based on recent performance. However, I plan to wait for an opportunity to buy when this stock has fallen out of favour with investors.

The post The Glencore share price: time to buy? appeared first on The Twelfth Magpie.

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Roland Head 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.

Furthermore, stocks that have the potential to deliver rapidly-rising dividends over a sustained period could become increasingly in demand among investors. This may lead to rising share prices that could enhance the total returns on offer.

With that in mind, here are two FTSE 100 stocks that appear to offering improving dividend prospects.

Glencore

The recent performance of FTSE 100 mining company Glencore (LSE: GLEN) has been relatively disappointing. It has suffered from weak investor sentiment due to regulatory risks, as well as the prospect of a general slowdown in the world economy. As such, its shares trade on a price-to-earnings (P/E) ratio of just 7.2, while they offer a dividend yield of 6.2%.

Over the long run, the company could have a bright future. It is ramping-up production of the materials that are used to produce batteries for electric cars. With this likely to be a key growth area for the automotive sector, it would be unsurprising for their prices to rise. This could lead to a tailwind for the business over the coming years.

Since Glencore’s shareholder payouts are currently covered 2.2 times by profit, they seem to be sustainable at their current level. Although there may be more stable stocks available in the FTSE 100 at the present time, the company’s valuation and yield indicate that it offers a wide margin of safety. As such, now could prove to be the right time to buy it.

Fresnillo

For investors who are concerned about the prospects for the world economy given the ongoing trade war between the US and China, gold and silver producer Fresnillo (LSE: FRES) could be a worthwhile investment.

The company could benefit from a rise in the price of precious metals over the medium term. Historically they have shown low positive correlation to the world economy’s outlook, and may even benefit from increased risk-aversion among investors.

This is expected to lead to rising profitability for the business, with Fresnillo forecast to post a rise in net profit of 27% in the next financial year. This is due to catalyse its dividend growth rate, with an increase in dividends per share of 24% forecast for the 2020 financial year.

Although the stock has a dividend yield of just 2.4% at the present time, it offers strong growth potential over the long run. This could mean that an investment today offers a relatively high income return over the coming years as dividends rise. Therefore, with the stock also having defensive characteristics, it could be a worthwhile purchase for income investors.

The post 2 FTSE 100 dividend stocks I’d buy in a Stocks and Shares ISA today appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any of the shares mentioned. The Motley Fool UK has recommended Fresnillo. 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.

Corruption threat

The Glencore share price is down 26% over the past 12 months, and fears of a global slowdown aren’t the only culprit. It is now being probed for “corrupt practices” by the US Commodity Futures Trading Commission (CFTC), amid reports of money-laundering and other compliance issues in the Democratic Republic of Congo, Venezuela and Nigeria. It has been ordered to hand over documents to the Department of Justice.

The group was also caught up in President Trump’s sanctions on Russian companies, because of its 8.75% stake in Russian aluminium producer Rusal, although these have since eased. 

Billionaire CEO Ivan Glasenberg plans to retire in the next three to five years. His final stint at the world’s biggest mining company isn’t going to be dull.

At the coal face

In 2018, Glencore’s adjusted EBITDA earnings rose 8% to $15.8bn while net income rose 5% to $5.8bn. It was boosted by a sharp rise in commodity prices, still the main factor driving mining sector sentiment and stock movements.

Earnings have cooled on falling prices for thermal coal, which makes up around 25% of the group’s earnings. Coal is likely to face growing environmental challenges, for example, Norway’s massive sovereign wealth fund may sell its $1bn stake to meet its Parliament’s tighter ethical investing rules. However, that is only around 2.03% of Glencore’s stock, and the shift to electric power could boosts earnings at its copper and cobalt mines in Africa.

Glencore has suffered one or two broker downgrades in recent months, amid concerns that its start-of-year rally left the share price vulnerable. Trading at 10.9 times forward earnings, it hardly looks overvalued, though.

War talk

Net debt is a worry though, up 44% last year to a higher-than-expected $14.7bn, even if it’s still within its desired range of between $10bn to $16bn.

The £40bn Swiss-based, London-listed company has enjoyed healthy cash flows, which funded $5.2bn of shareholder returns and buybacks in 2018. In February it announced a base distribution of $0.2 per share worth $2.8bn in total, plus a new $2bn buyback programme. The board may also top this up, depending on market conditions, and the progress of this year’s targeted $1bn of non-core asset disposals.

Macro concerns

The current yield is 5.64%, comfortably above the 4.5% average yield for the FTSE 100. This makes Glencore a top dividend stock, and a tempting long-term hold, but should you buy it now? Concerns over the global economy are growing (aren’t they always) while China’s growth is slowing, with Trump’s trade war aggravating the problem.

We could see a turnaround on both these issues shortly, though. The Fed is expected to cut interest rates two or three times this year, which may light up stock markets, while Trump is tweeting optimistic signals on talks with China. Both could boost Glencore. 

Commodity stocks are cyclical and with the stock down a quarter in the last year, now may be a buying opportunity. Those corruption charges could weigh on the share price for some time, though.

The post Why I’d buy the Glencore share price at today’s dirt cheap price appeared first on The Twelfth Magpie.

More reading

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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.