The mining industry has long been known for its hefty dividend payouts, despite the cyclical nature of the business and high capital expenditures. Companies like Rio Tinto and BHP boast impressive dividend yields of over 5%, but when it comes to total returns, these stocks have been lagging behind due to the dampened price action of metals, particularly iron ore, which trades well below all-time highs.
However, in the world of mining, copper is the metal that stands out. Copper hit its all-time high in May, defying concerns over China’s slowdown and geopolitical tensions. Some analysts even see copper as the “new oil,” leading mining giants to acquire copper assets as new discoveries become scarce.
Among major copper miners, Freeport-McMoRan and Southern Copper are notable players. Freeport-McMoRan is the largest publicly traded pure-play copper miner, while Southern Copper boasts the highest copper reserves globally. While Southern Copper has been paying generous dividends, Freeport-McMoRan has been more conservative with its payouts.
With the copper market expected to be in a deficit in 2024, driven by strong demand and weaker production, the long-term outlook for copper remains positive. However, despite its strong portfolio of copper mines, Southern Copper stock may not be a wise investment at current prices. Analysts are bearish on SCCO stock, citing high valuation multiples and uncertain dividend policies. Investors may want to wait for better prices before considering Southern Copper as a buy.
