I’ve thought of buying Rio Tinto (LSE: RIO) and Glencore (LSE: GLEN) shares a few times in recent years.
After a fall in demand from China, we’ve seen dividend cuts, mind. But the yields are still high. And Rio Tinto has just reported a boost in iron ore shipments.
With China on the way back, is this the right time to buy shares in these two giants? I think it just might be. Here’s what the share price charts look like:
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Rio Tinto’s Q1 output was mostly down compared to Q4 2022. Though with the state of the global economy in 2023, that comes as no great shock.
But it’s good to see that things are mostly up compared to the first quarter last year. Iron ore production from the firm’s Pilbara mines has grown 11% year on year. And shipments rose by 16%.
The iron ore price has picked up since last year’s dip. Copper has done the same, with the price strongly up over the past half decade.
Glencore merger
Thoughts on Glencore, meanwhile, are dominated by the proposed merger with Teck Resources followed by the demerger of the combined coal and carbon-intensive businesses.
Glencore has been rebuffed by the Teck board, and has now written directly to shareholders. In this latest move, the board said: “We also include a cash component, to buy shareholders out of their coal exposure.”
I think it sounds like a good deal for both companies. But the slow progress might hold the Glencore share price back for now.
Dividend
Rio Tinto cut its dividend in 2022. The 2021 year had been exceptional, though, and the 2022 cash still gave a dividend yield of 7% at the time. Glencore cut its dividend in 2019, but it’s since been growing.
Going on forecasts, Rio Tinto is down for a 7.3% yield in 2023, with Glencore on 7.4%. Various sources do seem to vary widely on these two, however, so we need a bit of extra caution there.
Expected cover by earnings is strong for them both, though. And this is a sector that typically keeps a good level of cover.
Time to buy?
The big question is, should I buy? If I had the cash for every stock that I think is on too low a valuation, I’d put both Rio and Glencore close to no-brainer buys. I’d snap up at least one of them for my ISA right now.
In the real world, I can’t buy everything. And I just see so many top FTSE 100 shares that look cheap. So these two are on my list for my next buy. But it depends on what else looks good when I have the cash.
Risky sector
This whole sector can be volatile and carries a lot of cyclical risk. So I also need to set that against what I think is a low valuation.
I do think I’ll add a miner to my ISA at some point, but which one? Right now, I most like the look of Glencore.
