To kick off 2022 with some bullish optimism, I’m going to have us raise our exposure to the global economic recovery and the prospect of strong spending trends for an array of infrastructure projects led by the United States and China, notes Bryan Perry, editor of Cash Machine.
Let’s add London-based Rio Tinto PLC ADR (RIO) to our Extreme Income Portfolio; the firm engages in exploring, mining and processing mineral resources worldwide.
The company offers aluminum, copper, diamonds, gold, borates, titanium dioxide, salt, iron ore and uranium. RIO has a market cap of $99 billion and a dividend yield of 11.00% that pays semi-annually. The three main commodities which will have the biggest impact on the sales and earnings are iron ore, copper and aluminum.
The drop in iron ore prices this year due to slower-than-forecast global growth and the pause in stocking of inventories in China seems to have run its course. Even with some lower demand leading up to the recent upward reversal in pricing, RIO has phenomenal profit margins stemming from the largest iron ore mine in West Australia.
Its cost is about $18.50 per ton and it costs about $10 per ton to ship to China. So, all in all, plus some additional costs, its breakeven on iron ore is about $30 per ton and the company is selling ore for $99-100 per ton as of Dec. 2.
RIO has a current annual dividend of $6.85 per share, paid in two semi-annual portions. Shares of RIO traded as high as $95.97 last May and are currently quoted at $62, sitting at a key support level. Buy Rio Tinto PLC ADR under $65.