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Few sectors are more reviled among investors these days than mining. But in a not entirely unrelated development, the downtrodden industry also boasts some of the market's most alluring dividend yields.

Consider, if you will, the sector's acknowledged royalty – its biggest, most diversified players. Anglo American PLC, BHP Billiton PLC and Rio Tinto PLC each deliver dividend yields north of 5.5 per cent.

For contrarian investors – especially ones with a taste for dividends – this warrants further inspection. Could the mining giants be a buy at today's depressed share prices? Three factors to consider:

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Things could get worse

Experienced investors know big dividends come with big risks. The most common reason for supersized yields is a shrinking share price, and the most common reason for a shrinking share price is a dismal outlook.

Anglo, BHP and Rio Tinto have all been consigned to the misery ward since commodity fever peaked and broke in 2011. Their share prices have wasted away in a steady and unrelenting pattern.

Their challenges are far from over. This past week, Anglo announced it was cutting diamond production at its De Beers subsidiary by 27 per cent because of global oversupply.

Meanwhile, Rio Tinto and BHP Billiton reported bumper iron ore output. The problem there is that the new supply is pouring into a market already buried in surplus. "The current race to the bottom amongst iron ore producers does not bode well for future iron ore prices," wrote analysts at Investec.

Similar gluts afflict many other raw materials. The Bloomberg commodity index recently hit a 15-year low and analysts at BCA Research argue the share prices of materials producers have further to fall if history is any guide. "The down-cycle is still in its early days," BCA wrote last month.

Go with the best

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For all the sector's current pain, its enduring appeal is that its products don't go out of style. At some point, miners will close their least profitable operations and throttle back on supply. At that point, commodity prices will level out and profits will stabilize.

Until then, it makes sense to focus on the largest, most stable players. BHP and Rio Tinto are the sector's biggest players and both enjoy single-A credit ratings.

Anglo is considerably smaller and has a more tenuous grasp on an investment-grade credit rating. Many analysts believe it will have to cut its dividend to conserve cash.

Heath Jansen at Citigroup follows all three companies. He is least enthusiastic about Anglo, which he rates as "neutral/high risk." He also recently cut BHP to a "neutral" rating because of a lowered outlook for earnings. However, he regards Rio Tinto as a "buy" and says it's his preferred pick among the diversified miners.

Watch this space

Given the challenges facing the sector, many investors may not want to jump into a mining stock right now. However, even cautious dividend hunters should keep a close eye on the big global miners.

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Much of the recent swoon in commodity prices reflects the slowdown in China's economy. If the Asian giant proves to be more resilient than expected, raw materials prices could bounce higher.

"Markets have become too pessimistic about the outlook for demand," Julian Jessop of Capital Economics argues. He expects China's outlook to improve over the coming year.

At the same time, producers will start to constrain supply, which should support prices. All of that, Mr. Jessop says, will "rescue the prices of key industrial commodities in the coming months."

If he's right, the big miners' share prices could break with recent history and tick upward. At the very least, signs of renewed life in commodities would ensure the safety of the lush dividends at BHP and Rio Tinto. In today's yield-hungry market, that would be nothing to sniff at.

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