I’m searching for the best high-yield income stocks to buy next month. Here’s one I’d buy for my portfolio if I had some cash to spare.
Platinum powerhouse
Minerals extraction is a highly complex and massively expensive business. Any problems in the exploration, development or production stages can sink revenues forecasts and drive costs through the roof.
This is a risk that investors in Sylvania Platinum (LSE: SLP) must endure. But it’s one I’d be happy to shoulder today.
Firstly, Sylvania’s dirt-cheap share price reflects the possible impact of operational problems on its bottom line. Today the South African digger trades on a forward price-to-earnings (P/E) ratio of just 4.1 times.
And secondly, a bright outlook for the platinum market suggests earnings here could rocket in 2023.
Supply shortages
Today the World Platinum Investment Council has predicted a meaty 303,000-ounce deficit for the metal next year. It expects demand to grow 19% year on year and supply to rise just 2%.
Breaking this down, demand from the automotive industry (platinum’s single-biggest end market) is expected to rise 11% in 2023. Industrial off-take meanwhile is tipped to increase 10%, “well above the 10-year average.” And bar and coin demand is forecast to leap 49% from this year’s levels.
Long-term drivers
I wouldn’t just buy Sylvania Platinum for the revenues boost it could receive next year though. I’m expecting demand for its metal to grow steadily as the green energy revolution accelerates.
Platinum group metals (PGMs) are being used in increasingly-large quanitities to filter out harmful emissions from cars. Platinum demand could also soar if green hydrogen use takes off (the metal is a key catalyst in the gas production process).
I’m also encouraged by Sylvania’s long-term production outlook. The company’s Tweefontein plant is on course to start producing metal by the end of 2022. Meanwhile its Lannex project is under construction and due to be commissioned around June.
Safe-haven qualities
I also like Sylvania Platinum because of the defensive characteristics of the products it mines. PGMs are dual-role metals that are popular with investors as well as industrial customers.
Consequently, demand for its metal tends to be more resilient than that of other commodities during economic downturns. Platinum prices have risen 2% in 2022 while copper, iron ore and other industrial commodities have tanked.
This helped Sylvania’s EBITDA rise 57% in the three months to September (to £26.4m).
8.1% dividend yield!
The defensive qualities of PGMs also give mining companies here the strength to pay dividends regardless of broader economic conditions.
Sylvania itself is expected to pay a dividend of 9.1 US cents per share in this financial year (to June 2023).
This forecast gives the company a mighty 8.1% dividend yield. And what’s more, I think there’s a great chance that the company will meet (or potentially even beat) City estimates.
That dividend is covered 3 times over by anticipated earnings. Furthermore, the business has excellent cash reserves to help it pay big dividends if profits disappoint. Sylvania reported a $138.6m cash balance as of September.
I think this income stock could be a great way to boost my long-term passive income.
