As the country gears up for a general election on December 12th, investors are facing an uncertain environment. Whatever the outcome, it’s clear the UK economy will have to overcome some significant challenges in the years ahead, whether they’re Boris Johnson’s Brexit or Jeremy Corbyn’s left wing agenda.
Against this backdrop, I think it’s time for investors to diversify outside of the UK. That means looking for high-quality dividend growth stocks with an international presence, mostly unaffected by whatever happens in December.
One company that ticks all of these boxes is integrated commodities producer Glencore (LSE: GLEN). I don’t think it’s unreasonable to say Glencore is a critical component of the global economy. It owns the largest commodities trading operation in the world, with millions of tons of produce, such as oil, coal, copper, grain, cotton and sugar passing through its operations every day.
The chances you’re using a commodity that has gone through Glencore’s supply chain at this very moment. In other words, the company is an essential part of the global economy and, as long as that global economy continues to grow, its profits should as well.
Apart from being listed in London, Glencore has very little exposure to the UK economy, which makes it the perfect stock for any investors who want to limit their exposure to the country’s messy political scene and economic uncertainty.
As my Foolish colleague T Sligo recently pointed out, shares in Glencore look attractive at current levels. Due to trade tensions, investors have been selling the stock of late but, after these declines, its shares are dealing at a forward P/E of just 12.2. On top of this, investors can look forward to a 5.5% dividend yield.
As well as Glencore’s international diversification and position in the global economy, I also like the fact investors are buying into the company alongside management.
CEO and founder Ivan Glasenberg owns 9% of the business so, if the share price drops, he feels the same pain as every other investor. Such a significant ownership stake incentivises the CEO to prioritise shareholder returns and make the right decisions for the company for the long term, rather than taking shortcuts to please the City.
Having said all of the above, the enterprise isn’t without its challenges. Glencore has invested billions in Africa, building its market share in commodities such as cobalt, nickel and copper, which should see a boom in demand as the move towards electrified transport accelerates.
However, so far, these new projects have not lived up to expectations. The group has struggled with rising losses and even the deaths of 40 miners who illegally invaded one of its cobalt mines in the Democratic Republic of Congo earlier this year.
These issues are concerning but, from a long term perspective, Glencore seems to be heading in the right direction. Cobalt demand has jumped 30% over the last four years as the market for electric vehicle batteries has accelerated rapidly. This trend is set to continue.
As one of the world’s largest cobalt producers, Glencore is almost certainly set to benefit from this growth. That’s why I think it could be time to buy this FTSE Brexit-proof dividend growth stock.
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Rupert Hargreaves owns no 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