Should Value Investors Buy Copper Stocks — or This Gold Miner With a Huge Dividend?

Centamin (TSX:CEE) and a Canadian copper mining stock look like great value today; but which is a buy, and should you consider holding both?

| More on:
The Motley Fool

Mining stocks have never been out of fashion for long, and in today’s economy they make a lot of sense. Expensive consumables from phones to electric cars are heavily reliant on metals and mined minerals, as these items become increasingly essential to our lives. The stocks such as the two listed below are going to become more and more desirable.

While cobalt and lithium have been obvious choices for mining stock lovers looking for upside of late, safer long-term plays might be gold and copper. Here, then, are two decently-valued stocks trading on the TSX that will give investors looking to diversify into metals exposure to both.

Centamin (TSX: CEE)

Today’s pick of the gold stocks on the TSX is Centamin. This high-quality mining stock is trading at a discount of 18% versus its future cash flow value. Its fundamentals look great, with a market-beating P/E ratio of 11.5 times earnings, a good PEG valuation of 1.2 times growth, and a respectable P/B of 1.2 times book. In short, this a huge value opportunity for gold stock lovers.

In terms of outlook, Centamin is looking at a 9.3% expected annual growth in earnings. Zero debt and a dividend yield of 8.3% go towards a precious metal miner that deserves a closer look by both value and passive income investors alike. And yes, if you just did a double-take, that’s a +8% payout if you buy at today’s price.

Lundin Mining (TSX: LUN)

Gold stocks are good to have when things are looking precarious; but then again, you may want to go for a copper play. Copper is going to be a big deal in years to come, with the growing electric vehicles market likely to be very dependent on the orange metal. Lundin Mining is a great choice here because while it gives exposure primarily to copper, it also mines nickel and zinc.

Discounted by 33% compared to its future cash flow value, Lundin Mining is looking sweet on market ratios, with a P/E of 8.7 times earnings, and PEG of 0.4 times growth, while in terms of a P/B ratio, value investors will be happy to know that Lundin Mining is trading at book value at the moment.

A 20.9% expected annual growth in earnings is a great thing to see in a value stock, as it means that investors aren’t getting trapped in a worthless investment that is just going to depreciate. On the contrary, Lundin Mining is likely to reward its shareholders over the next few years, as this projected earnings analysis shows.

Return on equity of 12% last year is not significantly high, but isn’t so bad for a mining stock, and shows a fairly good, if not totally efficient, use of shareholders’ investments. A low level of debt at around just 10% also helps reassure investors who are focused on balance sheets. Dividend investors should take note of a small but cheerful yield of 1.84% at today’s share price.

The bottom line

Lundin Mining is a great quality stock that definitely deserves more air-time. It has great multiples, gives exposure to seriously desirable metals, and is nicely diversified in terms of geography, with operations in Chile, the U.S., Portugal, and Sweden. Pair it with Centamin for a miniature mining portfolio if you’re light on materials or add to an already well-developed array of Canadian miners.

Fool contributor Victoria Hetherington has no position in any of the stocks mentioned.

More on Dividend Stocks

crisis concept, falling stairs
Dividend Stocks

This Canadian Dividend Stock is Down 15%: Should You Buy the Dip?

This company has increased its dividend annually for the past 26 years.

Read more »

Hourglass and stock price chart
Dividend Stocks

The Most Boring Stock on the TSX Might Be One of Its Smartest Buys

CNR stock does not offer explosive growth or a massive dividend yield. However, its stability and track record can make…

Read more »

A close up color image of a small green plant sprouting out of a pile of Canadian dollar coins "loonies."
Dividend Stocks

3 Canadian Dividend Giants I’d Buy With Rates on Hold

Focusing on dividend giants while interest rates are on hold is a prudent strategy for income investors.

Read more »

Retirees sip their morning coffee outside.
Dividend Stocks

These 3 Canadian Dividend Stocks Are Great for Retirees

Given their strong financials, consistent dividend payouts, and healthy growth prospects, these three Canadian stocks are ideal for retirees.

Read more »

rising arrow with flames
Dividend Stocks

The Market’s On Fire — But Should You Be Buying Right Now?

Despite the hot market, investors could still invest selectively in quality businesses. Diversify and dollar-cost average over time to mitigate…

Read more »

man with shovel stands by a hole
Dividend Stocks

TD Just Put $150 Billion Behind Canada’s Next Investment Boom. Should You Buy the Stock?

Instead of betting on which mega-project wins, consider a picks-and-shovels play on the bank that earns interest and fees on…

Read more »

telecom towers concept for wireless technology
Dividend Stocks

Bell Just Made a $52.5 Billion Bet on AI. So Is BCE Stock Finally a Buy?

BCE’s ambitious AI hub plan could reinvent the telecom’s growth story, but it first requires years of heavy spending.

Read more »

A train passes Morant's curve in Banff National Park in the Canadian Rockies.
Dividend Stocks

Canada Just Cut the Tax on New Investment Nearly in Half: This TSX Stock Could Win

Canada’s new tax write-off could quietly drive more investment than any single mega-project announcement.

Read more »