Freeport-McMoRan Copper & Gold Inc. (FCX), Rio Tinto plc (ADR) (RIO): Two Promising Metal Companies With Solid Dividend Yield

Diversified product portfolio and cost-cutting initiatives

While the company has exposure to copper and other metals, a substantial part of its business is involved in coal mining. The company recently augmented its presence in Mozambique with its new collaboration with the state mining company Empresa Mocambicana de Exploracao Mineira. Rio Tinto plc (ADR) (NYSE:RIO) holds 75% stake in the newly formed entity. The acquisition will also help to balance the company’s Mozambique coal business, which has suffered a lot lately.

Rio Tinto plc (ADR) (NYSE:RIO) suffered $3 billion worth of net loss for its FY2012; however, its steps to improve its margins are starting to pay off. The company is looking to curtail $5 billion worth of costs over the course of next two years. Such cost cutting will help the company to remain afloat as commodity prices remain depressed. Rio Tinto plc (ADR) (NYSE:RIO) lost 11.3% of its market value year-to-date. However, at the very same time, it offers 3.7% dividend yield.

Rio Tinto derives 70% of its revenue from its iron ore segment. While the segment currently faces overproduction issues, demand is also expected to increase in the future as growing economies boost their infrastructure. The company is also looking to restructure its management cadre as it recently appointed Sam Walsh as its new CEO. The new commander is likely to focus on efficiency and cost-cutting measures.

The dividend yield makes Rio Tinto plc (ADR) (NYSE:RIO) a better investment than its peer BHP Billiton Limited (ADR) (NYSE:BHP), which offers 3.3% dividend yield. BHP Billiton Limited (ADR) (NYSE:BHP) also has large stake in the petroleum business and thus, unlike Rio Tinto plc (ADR) (NYSE:RIO), may not be in the position to draw gains as and when the metal sector starts rising again.

Bottom line

Markets are currently trading at their peak levels and the basic materials sector has lagged behind so far. But among the rubble, there are some gems as the above companies, which are capable of providing long-term gains as well as income.

The article 2 Promising Metal Companies With Solid Dividend Yield originally appeared on Fool.com and is written by Mitra S.

Mitra S has no position in any stocks mentioned. The Motley Fool owns shares of Freeport-McMoRan Copper & Gold. Mitra is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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