Income seekers should fill portfolios with mining shares, suggests Citigroup
Listed miners are offering the most attractive dividend income relative to the market for years, according to latest research from the US bank.
Metals & Mining as a sector has the highest relative dividend yield relative to the UK, with arguably more sustainable dividends said the broker in a note.
“The miners are currently trading at a dividend yield of 6.2%, compared to 15-year average of 2.5%.
“The UK market yield is 3.4%, slightly lower than 3.9% average.
“Consequently mining offers a 271bps yield premium to the UK market vs an average of -56bps in the past 15 years.”
“In other words, assuming consensus dividend forecasts are correct, there is a 65% upside to the mining sector if it were to trade inline the market dividend yield.”
Citigroup also sees potential for the mining sector to raise dividends in future, adding that it now already contributes around 12% of the dividends in the UK market – the highest levels ever.
“At spot commodity prices, the dividends of the UK mining companies could double relative to 2019 levels.
“ In terms of ability to pay dividends, the mining sector ranks second highest among the European sectors.”
The broker suggests that compared to other groups such as tobacco and oil, payments from dividends are also more acceptable from an ESG perspective.