Should I Buy Rio Tinto plc (ADR) (RIO) for My ISA?

Page 1 of 2

LONDON — We’re reaching the end of the current ISA year, so which companies should you be looking at for a last minute top-up? I reckon the tax-efficient investment wrapper is best suited to decades-long investing in solid blue-chip shares.

One great approach is to transcend the short- and medium-term ups and downs of cyclical sectors, and tuck some cyclical shares away when they’re cheap. That means companies such as Rio Tinto plc (ADR) (NYSE:RIO) (LSE:RIO), the FTSE 100 miner of iron, aluminum, copper and other metals and minerals.

Rio Tinto plc (ADR) (NYSE:RIO) (LSE:RIO)

All share-price appreciation in an ISA is tax-free and there is no additional tax to be paid on dividends. But don’t forget, this year’s allowance of £11,280 must be used up by April 5 — just click here for more ISA information.

Why buy now?
Every company that digs up metals and minerals tends to see profits go up and down in tune with the world’s economies — demand and prices are higher during economic booms, and lower during busts.

The recession in the West, coupled with a slowdown in Chinese demand, is really the only reason that mining shares have been stagnating over the past couple of years. In the long run, demand will almost certainly rise again and prices will surely recover. If we can buy in when the economic cycle is not riding high, and when major investors are keeping away because they’re focused more on the short term, we should hopefully power up our ISAs nicely.

Current valuation
Though things have been improving over the past few months, at 3,314 pence today, Rio Tinto plc (ADR) (NYSE:RIO) (LSE:RIO)’s shares are down nearly 30% from their peak of 4,712 pence from 2011. Earnings per share fell by 38% for the year to December 2012, which is not great, but it is largely in line with the sector. And the full-year dividend for the year was actually raised by 15% to 167 cents per share (approximately 104 pence) — that’s a yield of 3.1% on the current share price.

Forecasts for the next two years are looking good, with City analysts expecting earnings to gain 17% for 2013, with a further 12% suggested for 2014. That puts the shares on a forward P/E for this year of only 8.5, which is a lot cheaper than the average FTSE 100 rating of just over 14 — and it drops to just 7.6 for 2014 estimates.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!