As the recent economic numbers from China have been down, so have the stock prices for BHP Billiton (NYSE: BHP), Rio Tinto (NYSE: RIO), Peabody Energy (NYSE: BTU), and others in the natural resources. There certainly is no mystery why: China is the biggest consumer of copper, coal, iron ore, and many other commodities. Those are all needed to feed the factories and the farms of the world’s largest economy as measured by purchasing power.
So, when China is off, so are Rio Tinto, Peabody Energy, BHP Billiton, and others in the sector.
That has certainly been the case in recent market action. Over the last month, BHP Billiton, the world’s largest commodity company, is down nearly 2 percent (chart below). The biggest coal firm on the globe, Peabody Energy, is off more than 4.2 percent. Rio Tinto has fallen more than 7 percent for the same period.
Investors should upon this as an opportunity to buy at a discount for the long term.
BHP Billiton, Peabody Energy, and Rio Tinto are solid blue chip companies. Each is the largest in its field in some capacity. All do better when China is doing well. That is not the case in recent times, so all have fallen.
But these companies have the puissance to eventually rebound.
Until that happens, the dividend income pays investors to wait. At present, the average dividend for a member of the Standard & Poor’s 500 Index is just under 2 percent. The dividend yield for Rio Tinto is 4.15 percent. For BHP Billiton, it is 3.62 percent. Peabody Energy pays its shareholders a dividend income stream at the rate of 2.16 percent.
Economic growth will become stronger in China, as detailed in a previous article on this site.
What that happens, its demand for natural resources will boom again. From that, the stock prices for BHP Billiton, Peabody Energy, and Rio Tinto will rebound. Long term investors will be rewarded with a robust total return.