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The FTSE 100 is crammed full of income stocks that offer sky-high dividend yields that thrash the returns on cash.
I’d much rather buy them to build retirement wealth than save into a Cash ISA, even though the Bank of England has just hiked base rates to 4%. Why put up with a little over 3% on easy access when I can double that from top dividend stocks like these two.
Dividend stocks for me
Investors in Chilean-based copper mining group Antofagasta (LSE: ANTO) have enjoyed plenty of growth lately. Its share price has soared 27.14% over 12 months, and 87.78% over five years. Yet it still trades at an undemanding 14.9 times earnings.
There could be more to come, as investors anticipate that demand from China, the world’s biggest copper importer, will fly now the country is unleashed from lockdown. Second-guessing commodity price movements is tricky, though, as a global recession could hit demand from elsewhere. Also, the copper price has climbed 19.5% in a year, and will have to work hard to climb higher.
Last month, Antofagasta reported a 10.4% drop in output to 646,200, mainly due to lower ore grades and a drought. However, it anticipates this will recover to between 670,000 and 710,000 tonnes in 2023.
It’s income I’m after, though. Currently, the stock yields an impressive 6.7%, but this is covered just once by earnings. On closer inspection, Antofagasta’s dividend history is a little bumpy. It paid a dividend per share of 44 US cents in 2018, which fell to 18 cents in 2019, then shot up to 55 cents in 2020 and $1.43 in 2021.
Another concern is that Antofagasta generates earnings in US dollars. As the Fed slows and eventually reverses its interest rate hikes, the greenback is likely to fall from today’s high and this could hit revenues.
I would invest in Antofagasta rather than a cash ISA, but I reckon there are safer dividend yields on the FTSE 100. Like this one.
A platinum investment
Anglo American (LSE: AAL) is another FTSE 100-listed mining company but with greater diversification as it produces platinum, diamonds, nickel and iron ore as well. It is the world’s largest producer of platinum, with around 40% of world output, and owns the world’s largest diamond company De Beers Group.
The company’s share price has barely climbed in the last year, rising just 1.7%, but it is up 100.41% over five years. Anglo American stock is nonetheless cheaper than Antofagasta, trading at just 6.5 times earnings.
Its dividend looks healthier, too. It yields 6.9%, covered 2.5 times earnings. Payouts have been smoother as well, with the dividend per share set at $1 in 2018, then $1.09 in 2019, $1 in 2020 and $2.89 in 2021.
Today’s Q4 figures show copper production up 52% to 244,000 tonnes following a ramp up at its Quellaveco mine in Peru. Total production across its portfolio is up 10%.
Again, investors like me should balance improving Chinese prospects with against global recession fears and a weaker US dollar. However, I find Anglo American’s low valuation and high yield tempting. I will buy it when I have some money to spare.