There are fresh developments in the Sirius Minerals (LSE: SXX) story. Last week, hedge fund Odey Asset Management bought a 1.3% stake in the challenged polyhalite miner. It subsequently urged the FTSE 100 multi-commodity miner Anglo American to increase its bid price for a potential SXX acquisition. Odey has now increased its share in SXX to 1.51%. This gives it greater weight in the shareholders’ vote next week that will decide if AAL’s offer price of 5.5p a share is acceptable or not.
Assessing what’s next for SXX
The possibility of the shareholder vote going against AAL’s current bid has increased. This in turn means that the likelihood of SXX going into administration in the next few months has risen as well. After its alternative funding proposal failed earlier this month, the Sirius board had cautioned investors of this outcome if they chose not to vote in favour of AAL’s offer.
With fresh question marks on the company’s future along with the stock markets’ fall this week, Sirius Minerals’ share price has fallen. As I write, it’s trading 11% below AAL’s offer price.
This may look like a tempting, if risky gamble, if we were looking to make a quick buck. But let’s not go there. I think there are enough gains to be made from safer stocks that are trading at significant discounts thanks to the latest sell-off in the stock markets.
A high dividend yield
Among mining stocks alone, one example is the FTSE 100 Anglo-Australian miner Rio Tinto (LSE: RIO). It has a high 8.2% dividend yield right now. It also increased the ordinary dividend payout by 29% from last year, making it even more attractive to me.
Note that its total dividend has actually fallen from 2018. This is because RIO paid a big special dividend on account of divestment in 2018, that led to the increase in total payout. It paid a special dividend in 2019 as well, but it was smaller than the one in 2018. I’m not terribly worried about that, however, because the dividend yield estimates don’t take the special dividends into account in any case, only the ordinary one. Despite that, RIO has a high yield.
In fact, if I add the special dividend of around 50p per share, which was paid along with the interim dividend, then the yield rises to an even higher 9.5%. I think the key takeaways from this are that RIO’s yield is worth investor consideration and that there’s a possibility of even higher passive income because it may just pay another special dividend.
But dividends aren’t the only reason I like Rio Tinto. Since 2016, its share price has seen a consistent rise, which isn’t a trend all miners can boast of. Moreover, it ended up discovering lithium deposits recently when it went looking for gold. This could bode well for the future, as electric vehicles’ demand increases overtime. I think RIO has enough going for it to be a winning stock in the future.
