Vale SA (ADR) (VALE): A High-Yielding Industrial Giant for Your Portfolio

Leaving aside the dividend yield, Vale clearly steals the show. Amongst the three, it’s not only the most undervalued stock, but also enjoys the highest net margins, with the lowest debt/equity ratio. Moreover analysts estimate its EPS to grow by nearly 16% over the next year. The reason Cliffs Natural Resources misses out is that its payout ratio is a modest 28% while its yield is massive. Its shares have lost nearly 60% of their value over the last year, which has artificially boosted its yield. BHP Billiton however, isn’t undervalued and its metrics don’t reveal anything compelling to buy it at high valuations.

There’s another peer, Sterlite Industries India Limited (ADR) (NYSE:SLT), which is an Indian mining company. Its production took a hit when the Supreme Court of India imposed a ban on the operations of 90 mines in Goa. The state alone has the capacity to produce 50 million tonnes of iron ore annually, and to meet up with the shortfall of supply, the Indian government is looking to impose a ban on iron ore exports. This is definitely not good for mining plays like Sterlite Industries.

Conclusion

I believe that Indian-based Sterlite Industries would underperform the market, due to government policies and bureaucratic loops. Vale however has its share of positive catalysts, and strong fundamentals to ensure healthy growth. BHP Billiton looks overvalued, while Cliffs Natural Resources has been losing value continuously. To wrap it up, Vale appears to be the best investment option available.

The article A High-Yielding Industrial Giant for Your Portfolio originally appeared on Fool.com and is written by Piyush Arora.

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