What are we looking for?
Sustainable dividends from copper stocks as demand – and prices – for that metal rise.
The screen
Gold’s recent jump to new highs may have outshone another metal’s steady rise toward its own all-time high.
Still, copper and copper stocks reclaimed that spotlight this week with BHP Group Ltd.’s unsolicited US$39-billion bid for rival copper miner Anglo American PLC. The possibility of the deal, which would create the industry’s single-largest player, lifted the share price of most copper miners on speculation the move will set off a round of industry consolidation.
Regardless, things are looking up for copper. Unlike gold whose demand waxes and wanes with inflation and interest rates, copper prices tend to rise with the economy and the resulting increase in construction projects, including electrical installations. The long-term shift to copper-hungry electric vehicles (EVs) from gas-powered cars should keep prices elevated. (Note: EVs contain about 80 per cent more copper than gasoline-powered vehicles.) The projected build-out of power-intensive AI data centres will also bolster copper demand.
Meanwhile, the lack of new copper mines will continue to constrain supply in the near term.
From a list of copper stocks, we identified leaders that pay dividends. We then applied our TSI Dividend Sustainability Rating System. It awards points to a stock based on key factors:
- One point for five years of continuous dividend payments – two points for more than five;
- Two points if it has raised the payment in the past five years;
- One point for management’s commitment to dividends;
- One point for operating in non-cyclical industries;
- One point for limited exposure to foreign currency rates and freedom from political interference;
- Two points for a strong balance sheet, including manageable debt and adequate cash;
- Two points for a long-term record of positive earnings and cash flow to cover dividends;
- One point if the company’s an industry leader.
Companies with 10 to 12 points have the most-secure dividends, or the highest sustainability. Those with seven to nine points have above-average sustainability; average sustainability, four to six points; and below average sustainability, one to three points.
More about TSI Network
TSI Network is the online home of The Successful Investor Inc. – the group of widely followed Canadian investment newsletters by editor and publisher Pat McKeough. They include our award-winning flagship newsletter, The Successful Investor, and the TSI Dividend Advisor. TSI Network is also affiliated with Successful Investor Wealth Management.
What we found
Copper stocks with reliable dividends
| Ranking* | Company | Ticker | Div. Sustain. Rating | Points | Div. Yld. (%) | Mkt. Cap. ($ Mil.)** | 1Y Ttl. Rtn. (%) | Recent Price ($)** |
|---|---|---|---|---|---|---|---|---|
| 1 | Rio Tinto PLC (ADR) | RIO-N | Average | 6 | 6.5 | 85,346.2 | 7.9 | 66.92 |
| 2 | BHP Group Ltd. (ADR) | BHP-N | Average | 6 | 5.2 | 150,050.4 | 0.8 | 57.41 |
| 3 | Southern Copper Corp. | SCCO-N | Average | 6 | 2.9 | 84,447.1 | 45.1 | 109.41 |
| 4 | Teck Resources Ltd. | TECK-B-T | Average | 5 | 0.8 | 32,245.0 | 10.9 | 66.19 |
| 5 | Lundin Mining Corp. | LUN-T | Average | 4 | 2.3 | 11,822.2 | 51.2 | 15.47 |
| 6 | Amerigo Resources Ltd. | ARG-T | Below-Average | 3 | 7.1 | 276.9 | 3.7 | 1.68 |
Source: Dividend Advisor.
*Ranking is determined by TSI Dividend Sustainability Score. Where overall points are the same, analysts considered P/E, dividend yield and industry outlook to decide final placements.
**Share price and market cap are in native currency
Our TSI Dividend Sustainability Rating System generated six stocks. Canada’s Teck Resources Ltd. TECK-B-T gets a big part of its revenue from copper, with the rest mostly coming from steelmaking coal and zinc. Anglo-Australian mining giants Rio Tinto PLC RIO-N and BHP Group Ltd. BHP-N are both major global producers of copper (with BHP poised to become the industry’s titan if its Anglo-American bid is successful). Mexico’s Southern Copper Corp. SCCO-N mines the red metal in Mexico and Peru. Toronto-headquartered Lundin Mining Corp. LUN-T extracts both copper and zinc worldwide. Junior miner Amerigo Resources Ltd. ARG-T, based in Vancouver, produces copper by processing tailings from Codelco’s El Teniente mine in Chile, the world’s largest underground copper mine.
Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.
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