Resource Stocks – Our latest article for the ASX

Below is a small preview of my latest article for the February edition of the ASX newsletter. The ASX have titled it ‘Is it time to buy resource stocks?’ You may want to read some of the other articles we have written for the ASX in recent times so follow this link to our Your Trading Mentor blog.

If you prefer to skip the text below and go straight to the ASX website to read the full article, click the link at the bottom of the page.

I also have a great podcast for you to listen to, which is about six successful share trading strategies click here.

Is it time to buy resource stocks?

When the ASX asked me to write an article about buying resource stocks for dividend yield, I must say that I’m not used to hearing the words dividend yield and mining stock in the same sentence, let alone buying a mining stock because of its dividend yield. However, I did understand why they specifically asked me to do this article and you will too as you read it.

In my opinion, buying a stock just to get a dividend is not a good investment, and never will be, regardless of the return being offered, the current market conditions, or the size and profile of the company paying the return. This article could stop here, however it might help you if I explain my thinking.

I can understand, with the cash rate currently at historical lows, that finding a return greater than 3.0 per cent is attractive. Further, right now, some of the big resources companies offer dividend returns around, or above, the current market average of 4.6 per cent, which may drive some towards swapping the security of a term deposit for a better return elsewhere.

Traditionally, investors looking for yield outside of cash would invest in bank stocks, as they tend to be far less volatile than other stocks, whereas the more volatile resources stocks typically paid low dividends. For example, in 2010, BHP Billiton paid around 2.7 per cent dividend and in the boom time most resources stocks paid less than 2.0 per cent. At the time of writing, the big resource companies are paying high fully franked dividends, including BHP Billiton (5.2%), RIO Tinto (4.4%), and Woodside Petroleum (7.0%).

Read the full article ‘Is it time to buy resource stocks?’

Dale Gillham

Wealth Within

If you have any questions or have a specific share market tip you want us to cover,  feel free to email and we’ll get back to you within 2 business days.