The importance of the mining industry and raw materials to the global economy cannot be overstated, as raw materials are required by a wide range of industries to build and manufacture goods, products and infrastructure.
When the economy expands, the demand for mineral materials is significant, driving up the prices of the relevant commodities. As supply and demand can be affected by a variety of factors such as industrial demand, economic growth, environmental regulations and geopolitical risks, this also means that the mining industry is typically highly volatile and cyclical.
But despite this, mining and materials stocks offer attractive opportunities for investors looking to diversify their portfolios or benefit from emerging decarbonization and electrification trends. The following mining and materials stocks are not only fundamentally and profitably sound, but also pay generous dividends, making them solid buys in February 2024.
Kinross Gold (TSX:K) is a leading Canadian mining and materials stock. The Toronto-based gold mining company currently has a market cap of C$9.1 billion and a stock price of C$7.41 per share, which has risen 15.4% over the past six months and pays an annual dividend yield of 2.2%.
Kinross Gold shares have significantly outperformed the broader market over the past year, rising about 45 per cent, thanks in large part to its strong financial growth trend. In the first three quarters of 2023, the company’s total revenues rose 27.7% year-over-year to C$3.1 billion, and it is on track to meet its annual production guidance. What’s more, the company’s adjusted earnings more than doubled during the period to $0.33 per share, far exceeding analyst expectations.
It’s worth pointing out that Kinross Gold’s record quarterly production from its Tasiast gold mine in west-central Mauritania during the third quarter pushed the company’s total gold equivalent volume up 11 per cent year-on-year to 585,449 ounces. Production and financial growth trends are likely to improve in the future as the company makes progress on other projects under development, such as Manh Choh, helping to drive the share price higher.
With a current market cap of $1.99 billion, Hudbay Minerals (NYSE:HBM) is just one step away from becoming a mid-cap stock. And investors have reason to believe that this goal will be achieved in the near term, as Wall Street analysts are forecasting that the company’s earnings will grow 318% over the next 12 months.
Analysts are bullish on the company because Hudbay Minerals is a leader in copper mining, which accounts for about 50 per cent of the company’s total revenue, with gold accounting for about 22 per cent and zinc and silver making up the rest. Demand for copper is expected to keep growing as the world continues to tilt towards renewable energy sources, including but not limited to electric vehicles.
The company’s management has maintained strict financial discipline. This is despite the fact that a forward P/E ratio of 35 times means that there is a premium to be paid to buy this mining stock now. However, after a year of range-bound movement, analysts are predicting that the company’s shares still have 30 per cent upside potential. Twelve of the 14 analysts tracking the stock have a “strong buy” or “buy” rating on the stock. Although Hudbay Minerals has a humble dividend yield, but its huge growth prospects aren’t often seen in mining stocks.
Lundin Mining (TSX:LUN) is another Canadian mining company to consider as a long-term investment, with a focus on copper, zinc, nickel, and gold, and mines in a number of countries, including Spain, Brazil, and the U.S. The company has a current market capitalization of C$8.6 billion and a share price of C$11.16 per share, with shares up 15.2% over the last year and a dividend yield of 3.2%.
On 14 January, Lundin Mining announced production results for 2023, with record consolidated copper production of over 314,798 tonnes and over 550,000 tonnes of copper equivalent. In the company’s published guidance, the copper production forecast is consistent with previous forecasts, but adds a gold production forecast for 2024. This reflects the company’s continued focus on strategic planning in terms of mine sequencing and grades profile at its mining operations, which could accelerate its long-term financial growth.