Are you looking to invest beyond Brexit? I know I am. And I think it makes sense that even while the politicians argue over it, investors should continue to seek out great businesses to invest in. Here’s one FTSE 100 share I believe will generate great returns for investors in the coming years.
One of the critical things when it comes to investing is to have a long-term mindset. It’s a rule that has been endorsed by many of the most successful investors including perhaps the most famous ever, Warren Buffett. It’s also why Brexit should be seen by investors as just a temporary concern in the larger picture when it comes to investments that could and should be held for many many years.
The company I’m looking at in this article is a leading global mining company. It has characteristics that I strongly believe will allow it to appreciate in value for many years to come, as demands for its products grows around the world and it uses its size to achieve economies of scale and adapt to new opportunities as and when they occur.
Digging for cash Rio Tinto (LSE: LON:RIO) is a long-time FTSE 100 constituent and one of the largest mining companies in the world, operating in around 35 countries across six continents. Despite the shares shooting up so far in 2019, the dividend yield is still above average at just under 5% and the price-to-earnings (P/E) ratio remains below 12, which indicates the share price is good value.
With a market capitalisation of nearly £75bn, Rio Tinto is a company that should be around for many years to come. It’s highly dependent on iron ore – the price of which is currently rising and is very profitable. It accounts for over half of the firm’s EBITDA. Also, the company is buying back its shares which should keep the price up.
Rewarding shareholders Looking at recent results, we get a mixed picture. But positively for investors, in the most recent six-month results to the end of June, the dividend was raised by 15% and underlying earnings rose 12%. The company has decided to pay out around half of earnings as a dividend every year which is a good, sustainable reward for shareholders. It means too that plenty of cash is being invested in the business – indeed the results showed capital expenditure was far higher – but I’d expect Rio to be able to invest this money wisely for future growth. Another upside for investors wanting to grab the shares now.
Rio Tinto’s size, mining expertise, focus on iron ore (although it does mine diamonds, aluminium, copper and more), dividend and low valuation all combine to make me think that it is a company that really can reward investors for many years to come. I feel Rio Tinto will still be mining long after the current Brexit debates become a distant memory.
Andy Ross has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2019