I’m eager to buy more of this FTSE 100 share!

I bought shares in this FTSE 100 giant a year ago and they’ve since lost almost 2%. Even so, I have plans to buy yet more of this dividend dynamo.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Entrepreneur on the phone.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

One old City saying warns: “Sell in May and go away, don’t come back until St Leger’s Day“. In other words, don’t buy shares during the warmer months, due to reduced trading levels, lower market liquidity, and wider pricing spreads. But as a bargain-hunter in the elite FTSE 100 index, I ignore this advice nowadays.

Though these words of wisdom may have worked well from the 17th to 20th centuries, I don’t take them to heart today. That’s largely because modern financial markets are dominated by massive institutional investors, huge hedge funds, and hyper-fast trading algorithms.

What’s more, my wife and I are expecting a tax-free lump sum within weeks. We would very much like to put this straight to work by buying more FTSE 100 stocks. Hence, I’m planning a big share-buying spree next month — despite it being near to the height of summer.

Passive income stocks: our picks

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

One FTSE 100 bargain I want to buy again

Though we have plans to buy stakes in several new companies, I’m not against buying more shares in existing holdings. Here’s one stock we already own that I’d like to buy more of shortly.

Rio Tinto rocks

My wife bought a stake in Anglo-Australian mega-miner Rio Tinto (LSE: RIO) close to a year ago at an all-in price of 5,204p a share. As I write, the stock trades at 5,105p, so we’re sitting on a paper loss of 1.9%.

Then again, we have no plans to sell our Rio Tinto shares, which we bought as a value/income/dividend play for the long term. Indeed, I’d like to buy even more shares in this £86.6bn mining behemoth soon.

Over one year, this widely held FTSE 100 stock has gained 1.7%, while it’s ahead 22.1% over five years. However, these figures exclude cash dividends — and Rio is one of the very biggest cash distributors in the entire London market.

At their current price, Rio shares trade on a price-to-earnings ratio of 8.6, for an earnings yield of 11.7%. But what really pushes me to buy more is their bumper dividend yield of 8%, covered 1.5 times by earnings. If it doesn’t cut this payout in 2023 (as it did in 2016 and 2022), then I’ll be delighted.

That said, the dividend payouts have followed a boom-and-bust pattern over the last five years, as my second table shows:

Year ending20222021202020192018Total
Total dividend$4.92$10.40$5.57$4.43$5.50$30.82

Although the dividends have zigzagged up and down, they total almost $31 over the past five years. At today’s GBP/USD exchange rate, this comes to £24.20. That’s almost half (46.5%) of Rio’s current share price. Wow.

Of course, thanks to falling metals and commodity prices during 2023, this year is set to be tougher for Rio than 2022 was. Indeed, I fully expect it to report lower revenues, cash flow and earnings this year. Even so, we bought this dividend powerhouse for the long run — and I hope to own even more shares ASAP!

Is this a top choice for growing wealth now?

Before deciding, we think this pick is another must-see.

Discover ‘One Top Growth Stock from The Motley Fool’ absolutely FREE.

Though past performance does not guarantee future results, over the past 5 years, it’s seen consistent double-digit revenue growth. ‘Return on capital’ - a key measure of business quality - is a colossal 57%. That’s almost 6 times higher than the UK average!

Best of all, it has a cult-like following. Customers who’re raving fans, potentially spending more money, more often - whatever the economy.

In our experience, discoveries like this are extremely rare.

So please, don’t leave without seeing, ‘One Top Growth Stock from The Motley Fool’, which includes both the Risks and opportunities.

Claim your FREE copy now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Cliff D’Arcy has an economic interest in Rio Tinto shares. 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.

More on Investing Articles

Investing Articles

4 REITs Fools own for passive income

REITs often have higher-than-average dividend yields compared to other stocks, making them a solid choice to consider for passive income…

Read more »

artificial intelligence investing algorithms
Investing Articles

Up 272% in just a year, is Palantir stock just getting started?

This writer recognises that Palantir has grown its business very well -- but does the stock price offer him an…

Read more »

Runner standing at the starting point with 2025 year for starting in new year 2025 to achieve business planing and success concept.
Investing Articles

Up 50%? The Aston Martin share price forecast is mind-blowing! 

If analysts are right, the Aston Aston Martin share price could absolutely rocket in the year ahead. Harvey Jones says…

Read more »

Investing Articles

As the S&P 500 drops, here are 2 Stocks and Shares ISA holdings I’m watching

Our writer has different views on how President Trump's tariffs might affect these two US holdings in his Stocks and…

Read more »

Surprised Black girl holding teddy bear toy on Christmas
Investing Articles

£10,000 invested in Tesla stock at Christmas is now worth…

Tesla stock has been one of best-performing investments of the past decade. But things haven't gone to plan for investors…

Read more »

Investing Articles

Up 279% in 5 years, could Meta stock keep soaring?

Meta stock has more than tripled in five years. This writer sees lots to like about the business but also…

Read more »

Pink 3D image of the numbers '2025' growing in size
Investing Articles

25% total return in a year? Is now the perfect time to buy BP shares?

BP shares are on the front line of today's global economic and political uncertainty but analysts think they can still…

Read more »

Affectionate Asian senior mother and daughter using smartphone together at home, smiling joyfully
Investing Articles

With Cash ISA changes coming, could now be the time to consider buying shares?

Changes to the Cash ISA could lead to greater investment in the stock market. This could be a good thing…

Read more »