3 Top Mining Stocks: Rio Tinto plc, Glencore PLC And Centamin PLC

Buying these 3 mining stocks looks set to be a prudent move: Rio Tinto plc (LON: RIO), Glencore PLC (LON: GLEN) and Centamin PLC (LON: CEY)

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One of the key challenges facing all investors is knowing when to buy a slice of a company. Certainly, there are opportune moments to sell profitable stakes in companies, but history tells us that it is the price at which you buy, rather than sell, that makes the biggest difference to your portfolio returns in the long run.

Of course, the mining sector is an excellent example of a space that offers great value for money at the present time. Certainly, things could get worse before they get better, with there being the potential for further falls in the price level of commodities such as iron ore. However, for long term investors now seems to be the ideal time to increase exposure to the sector, with there being high yields, low valuations and bright futures on the horizon.

Great Yields

When it comes to high yields, few companies in the mining sector can match Rio Tinto (LSE: RIO) (NYSE: RIO.US). That’s because it currently trades on a yield of 5.2% and, in fact, is among the highest yielding shares in the FTSE 100. And, looking ahead, Rio Tinto is expected to increase dividends per share by 4.4% next year, which puts it on a forward yield of 5.4% and means that, were you to buy a slice of it now, you would receive almost 11% in dividends over the next two years.

In addition to a high yield, Rio Tinto also has excellent long term dividend growth potential. For example, its dividend payout ratio is expected to be just 73% next year and this indicates that even if profitability rises at a rather pedestrian rate, there is still considerable scope for dividend increases over the medium to long term.

Low Valuations

When it comes to stocks offering growth at a reasonable price, Glencore (LSE: GLEN) is one of the prime examples in the FTSE 350. That’s because, with growth of 14% and 53% forecast in the next two years, Glencore has superb potential as a growth play. And, with a price to earnings (P/E) ratio of 18.8, this equates to a price to earnings growth (PEG) ratio of just 0.2, which is among the lowest (and most attractive) in the FTSE 350. As such, Glencore could see its share price rise significantly in 2015 and beyond.

Bright Futures

Of course, not all commodities have endured a rough ride in recent months. For example, the price of gold has been relatively steady and, looking ahead, improved performance is set to impact positively on gold mining company, Centamin (LSE: CEY). In fact, Centamin is expected to increase its bottom line by as much as 26% next year and, when combined with a P/E ratio of just 12.3, this indicates that the company’s share price could move significantly higher over the medium term.

That’s despite Centamin posting gains of 16% already this year and, alongside Rio Tinto and Glencore, it could prove to be a winning investment for long term investors.

RISK WARNING: should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice. The Motley Fool believes in building wealth through long-term investing and so we do not promote or encourage high-risk activities including day trading, CFDs, spread betting, cryptocurrencies, and forex. Where we promote an affiliate partner’s brokerage products, these are focused on the trading of readily releasable securities.

Peter Stephens owns shares of Rio Tinto. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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