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What are we looking for?

Sustainable dividends from copper’s coming gains.

The screen

Copper stocks saw strong growth with last year’s easing of the pandemic. We think the top picks among them have even more gains ahead as continuing economic recovery spurs construction, and the need for electrical components and wiring. Rising demand for electric-powered cars – they contain about 80 per cent more copper than gasoline-powered vehicles – is another impetus. On top of that, power utilities will need new copper transmission lines to feed the exponential growth in electric charging stations.

Meanwhile, copper supply remains constrained by the limited number of new mines coming onstream. Miners also face rising political pressure in the world’s two biggest copper-producing countries, Chile and Peru.

From a list of copper stocks, we identified growing market leaders that pay dividends. We then applied our TSI Dividend Sustainability Rating System. It awards points to a stock based on key factors:

  • One point for five years of continuous dividend payments – two points for more than five;
  • Two points if it has raised the payment in the past five years;
  • One point for management’s commitment to dividends;
  • One point for operating in non-cyclical industries;
  • One point for limited exposure to foreign currency rates and freedom from political interference;
  • Two points for a strong balance sheet, including manageable debt and adequate cash;
  • Two points for a long-term record of positive earnings and cash flow to cover dividends;
  • One point if the company’s an industry leader.

Companies with 10 to 12 points have the most secure dividends, or the highest sustainability. Those with seven to nine points have above-average sustainability; average sustainability, four to six points; and below-average sustainability, one to three points.

More about TSI Network

TSI Network is the online home of The Successful Investor Inc. – the group of widely followed Canadian investment newsletters by editor and publisher Pat McKeough. They include our award-winning flagship newsletter, The Successful Investor. The TSI Best ETFs for Canadian Investors is the latest. TSI Network is also affiliated with Successful Investor Wealth Management.

What we found

Dividend-paying copper stocks

Ranking*CompanyTickerDiv. Sustain. RatingPointsDiv. Yld. (%)Mkt. Cap. ($ Mil.)**1Y Ttl. Rtn. (%) Recent Price ($)**
1BHP Group Ltd. (ADR)BHP-NAverage612.695,769.6-2.265.52
2Rio Tinto PLC (ADR)RIO-NAverage69.292,585.4-3.574.29
3Southern Copper Corp.SCCO-NAverage66.350,374.0-5.964.03
4Teck Resources Ltd.TECK-B-TAverage50.521,984.073.841.00
5Lundin Mining Corp.LUN-TAverage43.37,938.8-6.310.84
6Amerigo Resources Ltd. ARG-TBelow Average35.0294.8109.21.59

Source: Dividend Advisor

*Ranking is determined by TSI Dividend Sustainability Score. Where overall points are the same, analysts considered P/E, dividend yield and industry outlook to decide final placements. **Share price and market cap are in native currency.

Our TSI Dividend Sustainability Rating System generated six stocks.

Vancouver-based Teck Resources Ltd. gets a big part of its revenue from copper, with the rest mostly coming from steel-making coal, and zinc. Note: Teck’s yield is meagre owing to its significant share-price gains over the past two years. Anglo-Australian mining giants Rio Tinto PLC and BHP Group Ltd. are both major global producers of copper. Mexico’s Southern Copper Corp. mines the red metal in Mexico and Peru. Toronto-headquartered Lundin Mining Corp. extracts both copper and zinc worldwide. Junior miner Amerigo Resources Ltd., based in Vancouver, produces copper by processing tailings from Codelco’s El Teniente mine in Chile. It’s the world’s largest underground copper mine.

We advise investors to do additional research on any investments we identify here.

Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.

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