Dividend payments can be a great way for investors to accumulate wealth over the long term. Some of the biggest dividend yields may be found in the FTSE 100 index, among the best-established companies. Let’s take a look at a firm with a yield of over 10%.
One of the highest dividend yields
Antofagasta’s (LSE:ANTO) share price has been volatile recently. In the past year, it’s down 21% and it’s fallen 26% in the past month. At the time of writing, the shares are trading at 1,078p.
The main reason that the company catches my eye is its remarkably high dividend yield. In fact, it has one of the highest in the entire FTSE 100.
In 2021, the firm – a copper miner operating in Chile – paid a dividend of $1.43 per share. Currently, this would translate into a dividend yield of 10.4%. This means that if the share price stayed roughly the same, I would be getting over 10% of my initial investment back by the mere fact that I hold stock.
As a potential investor, I find this very attractive. However, I’m also aware that dividend policies can change at any time.
Yet the business also has good prospects moving forward. For instance, it has identified a significant copper presence at the Encierro Project in the mountains of the Andes.Â
In addition, a recent analysis of its wholly owned Cachorro Project showed that copper deposits were higher than expected. Previous forecasts had been 142 megatonnes (Mt), which has been revised up to 155Mt.
Operations at all of the company’s sites, however, may be impacted if any further pandemic variants arise.
Improving economic outlook and strong earnings
These operational and production updates come within the broader economic environment of slowing demand for base metals, like copper. Lockdowns in China have particularly stifled demand for construction materials and other metals used in manufacturing.
However, investment bank JP Morgan recently stated that it expects a 7% quarter-on-quarter rebound in the Chinese economy in the second half of 2022. It specifically forecast that this could be good news for companies engaged in the mining and production of base metals, as Antofagasta is.
The business also had solid earnings per share (EPS) growth between 2017 and 2021. During this time, EPS rose from ¢76.1 to ¢142.5, resulting in a compound annual EPS growth rate of 13.4%. This is a speedy pace of earnings growth.
In addition, the shares may be cheap at current levels. Using price to earnings (P/E) ratios, I can better understand if a share price is under- or overvalued. Antofagasta has a trailing P/E ratio of 10.23. This is lower than a major competitor, Glencore, which comes in at 14.22. This is an indication that I could be getting a bargain.
Overall, Antofagasta offers the magic combination of competitive dividends and speedy earnings growth. I will be adding it to my portfolio in the coming weeks.