10.1% dividend yield! Is Glencore’s share price the best FTSE 100 bargain?
The Glencore (LSE:GLEN) share price has experienced an unpleasant start to the new year. While the broader FTSE 100 has risen 4% in that time, Glencore shares have dropped 15% in value.
As a lover of value stocks, I believe this fresh weakness provides a great dip-buying opportunity. At around £77.50 per share, Glencore shares trade on a forward price-to-earnings (P/E) ratio of 6.3 times. This is less than half the FTSE index average of 14.5 times.
The miner also offers supreme value for money when it comes to dividends. Its 10.1% prospective yield smashes the 3.6% UK blue-chip average.
Could Glencore shares be the best bargain out there for FTSE investors?
Be prepared
Investing in mining companies can be a bumpy ride. Exploring for raw materials, developing mines, and pulling ore from the ground are all highly complex procedures. A range of problems can occur that create huge costs and damage revenue forecasts. Some issues cannot be overcome at all.
As one of the world’s largest commodity companies, Glencore can better absorb such disappointments than most others. But this doesn’t make it immune to earnings-damaging setbacks.
A bigger threat to its share price is a downturn in energy and metal prices. This is a particularly large danger now, given the uncertain economic outlook. Falling demand for finished goods from China could send prices of copper and other key commodities through the floor.
Risk vs reward
Of course, all shares expose individuals to some degree of risk. What I have to ask myself as an investor is if the dangers to a company’s profits (and thus its share price and future dividends) are reflected in a company’s share price.
I also have to consider whether the potential benefits of owning a particular stock outweigh the threats. When it comes to Glencore, I think the possibility of making big money makes it a top stock to buy.
As one of the world’s biggest commodities producers and traders it has the financial strength to overcome operational problems and better navigate market downturns.
Moreover, its wide asset base — it owns 60-plus assets across the globe — means that trouble at one or two of its mines, refineries or plants has limited impact at group level.
A top FTSE 100 value stock
It’s my belief that Glencore’s share price will surge over the long term as the new commodities supercycle clicks through the gears.
Themes like the green energy transition and rising construction spending globally mean commodities consumption is tipped to balloon. The graph below from Statista illustrates how the trading of raw materials is on course to ramp up over the next several years.
As well as higher consumption, prices of metals will also likely be boosted by the scarcity of new mine supply coming online. Glencore then can expect to make big money from its trading and mining operations. And it could deliver huge shareholder returns through steady capital appreciation and huge dividends.
There are plenty of top-quality value stocks on the FTSE 100 today. But I think this blue-chip share is one of the best.
The post 10.1% dividend yield! Is Glencore’s share price the best FTSE 100 bargain? appeared first on The Motley Fool UK.
5 stocks for trying to build wealth after 50
Inflation recently hit 40-year highs… the ‘cost of living crisis’ rumbles on… the prospect of a new Cold War with Russia and China looms large, while the global economy could be teetering on the brink of recession.
Whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.
Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…
We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.
setButtonColorDefaults(“#5FA85D”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#ffffff”, ‘color’, ‘#FFFFFF’);
})()
More reading
- 2 dividend stocks that are dirt cheap right now
- 2 cheap FTSE 100 dividend stocks! Should I buy them next week?
- These 3 FTSE 100 firms are dividend dynamos!
- Record-breaking FTSE 100 still looks cheap. It hasn’t peaked
- If I’d invested £1,000 in Glencore shares 2 years ago, here’s how much I’d have now!
Royston Wild has no position in any of the shares mentioned. 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.
