These top high-dividend shares offer yields far above the 3.9% UK average. Here’s why I think they could deliver exceptional levels of passive income for years to come.
Metals giant
Investing in UK mining shares such as Central Asia Metals (LSE: CAML) can be risky business. Demand for their product can be highly cyclical so profits can sink when economic conditions worsen.
At the moment too, the near-term outlook is less that encouraging as China’s economy worsens. The Asian powerhouse is the world’s primary commodity market and sucks up around half of all copper shipments alone.
In a worrying omen, analysts at UBS have slashed their Chinese GDP forecasts in recent hours. They now expect growth of just 2.7% in 2022, down from a previous estimate of 3%. And a 5.4% prediction for 2023 has been slashed to 4.6% for 2023.
A clever dip buy?
Yet I believe the low valuations of many mining shares (including Central Asia Metals) reflects this troubled landscape. Today, this particular share trades on a forward price-to-earnings (P/E) ratio of just 5.6 times.
Central Asia Metals’ share price has sunk 12% in 2022. And as a long-term investor, I think this represents an attractive dip buying opportunity.
You see I expect demand for the company’s products to soar as the transition towards green technologies accelerates. This will likely lead to a sharp share price recovery from current levels.
I think sales of the copper it digs out in Kazakhstan will soar as manufacturing of electric vehicles (EVs) and related infrastructure increases. Meanwhile, consumption of the lead and zinc it produces in North Macedonia will step up as EV battery-building lifts off.
Another top mining stock
For the same reason I think Sylvania Platinum (LSE: SLP) could be a top buy. The platinum group metals (PGMs) it digs for also play a critical role in the fight against climate change.
The main industrial use of these commodities is in the manufacture of catalytic converters in cars and trucks. Legislative changes across the globe mean they are needed in increasingly large quantities to filter out harmful emissions.
However, platinum is also an important material in the production of green hydrogen. The World Platinum Investment Council reckons this role alone could boost platinum demand by a whopping 600,000 ounces over the next decade.
Big dividends
South Africa-focused Sylvania faces the same problems caused by China’s cooling economy. It also faces particular danger as interest rates soar to curb inflation. PGMs are also safe-haven investment metals that can fall in price when central banks tighten policy.
But like Central Asia Metals, I think this threat is reflected by the company’s low valuation. In fact Sylvania trades on an even-lower forward P/E ratio of 4.3 times.
Today, Sylvania boasts a big dividend yield of 6.7% for 2022. Furthermore, Central Asia Metals’ yield sits at a mighty 7.9%. I think both of these income shares are too good — and too cheap — to miss.