Here are three stocks I’d like to own for Christmas and beyond.
Mining and commodities
Mega-miner Rio Tinto (LSE: RIO) is a big player in iron ore but also has operations in aluminium, copper, diamonds, energy and other minerals. With the share price close to 4,275p, the forward-looking earnings multiple for 2020 is running just above 10. But the big attraction for me is the anticipated dividend yield around 6.4%.
I’m always wary of the sector’s cyclicality, but Rio Tinto’s cash flow has been holding up well over the past few years. Meanwhile in October, chief executive J-S Jacques explained in an update that production had improved across most products in the third quarter. In particular, sales of iron ore had increased into “robust markets.”
Jacques reckons disciplined allocation of capital, a focus on operational performance, and a “strong” approach to “value over volume” will provide “superior” returns for shareholders over all time frames. With such confidence oozing from the top executive, would it be remiss of me not to buy a few of the firm’s shares?
FTSE 100 housebuilder Barratt Developments (LSE: BDEV) keeps raising its dividend each year and it’s tempting to ask, when will the music stop? But with a low interest rate environment and consistent demand for new properties, there’s not much sign of a slowdown in the market.
Chief executive David Thomas said in an update in October that the firm started the new trading year well and there was a “healthy” order book in the autumn. He acknowledged the presence of economic and political uncertainty but reckons the financial strength of the balance sheet will see the company through any short-term bumps if they arrive. Meanwhile, the outlook is positive for the medium term.
With the share price near 670p, the forward-looking earnings multiple is just over nine for the trading year to June 2021. The anticipated dividend yield is almost 7%, which strikes me as too tempting to ignore.
Packaging and paper
Mondi (LSE: MNDI) said in October in an update that demand for its paper and packaging products had been a little softer in the third quarter than it had been previously. However, with a focus on efficient production and cost control, the directors don’t seem to be too worried. They said the firm’s “robust” business model and the “high-quality, cost-advantaged” asset base makes them confident about the outlook. It seems to me the firm operates in an attractive sector for today’s world.
With the share price near 1,643p, the forward-looking earnings multiple for 2020 is close to 12 and the anticipated dividend yield is about 4%. The firm has been a consistent performer delivering steady and balanced growth in revenues, earnings, cash flow and dividends for a long time, and I’m tempted to buy some shares to lock in that stream of income.
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Kevin Godbold has no position in any share 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.
Motley Fool UK 2019