The 3% Dividend Stock About to Take Over the TSX

Copper stocks received a cut recently in near-term growth. But long term? It’s only up from here.

| More on:

If there’s one sector investors need to watch closely, it’s copper. Copper stocks are poised to dominate the TSX in the future because copper is essential to the green energy revolution and global infrastructure development. As the world pushes towards renewable energy sources like wind, solar, and electric vehicles, the demand for copper is expected to surge due to its crucial role in electrical wiring and components.

Plus, with large-scale infrastructure projects on the horizon in Canada and globally, copper’s use in construction and technology sectors will keep demand high. This growing need makes copper stocks a hot commodity, likely driving their prominence on the TSX as companies ramp up production to meet global demand. So, let’s look at one to watch.

Lundin Mining

Lundin Mining (TSX:LUN) is a major player in the mining industry, known for its focus on base metals like copper, zinc, and nickel. With operations spread across the Americas, Europe, and Africa, Lundin has a diverse portfolio of mining assets that positions it well to benefit from the increasing demand for these critical metals. The company is particularly bullish on copper, which aligns perfectly with the global shift towards renewable energy and electric vehicles. Both of which require significant amounts of this versatile metal. Lundin’s strong operational performance and strategic acquisitions have made it a solid contender on the TSX.

The company has invested heavily in extending the life of its mines and improving efficiencies, ensuring that it remains competitive in a rapidly changing market. As the demand for essential metals continues to rise, especially with the ongoing green energy transition, Lundin Mining is well-positioned to capitalize on these trends.

Into earnings

Lundin Mining’s recent earnings report showcased a solid performance, giving investors plenty to be optimistic about. The company reported record quarterly revenue of $1.1 billion, driven by strong commodity prices and effective operational strategies. This impressive revenue translated into a robust adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $461 million and a significant free cash flow of $338 million. These numbers highlight Lundin’s ability to generate substantial cash even in a challenging market environment. Moreover, the company’s focus on cost management paid off, with cash costs coming in at the lower end of guidance, setting the stage for a strong second half of the year.

Another key takeaway is Lundin Mining’s strategic growth initiatives, particularly its decision to increase ownership of the Caserones mine to 70%. This move is expected to add an additional 25,000 tonnes of copper to Lundin’s production profile, strengthening its position in the copper market. Furthermore, the company reduced its sustaining capital expenditures by $45 million, demonstrating prudent financial management. With these strategic moves and strong financial results, Lundin Mining is well-positioned to continue delivering value to its shareholders​.

Bottom line

Alright, but is the stock valuable? Investors should take away that Lundin Mining’s current valuations reflect a mix of strong growth prospects and some cautious considerations. The company’s trailing price-to-earnings (P/E) ratio of 49.39 might seem high at first glance. However, it’s important to note that this is largely due to the cyclical nature of mining and the recent fluctuations in commodity prices. However, the forward P/E ratio of 16.23 suggests that earnings are expected to improve. This makes the stock more reasonably valued based on future earnings potential. That is further supported by the company’s impressive quarterly revenue growth of 84.10% year over year, indicating that Lundin is capitalizing well on the current demand for base metals, particularly copper.

Furthermore, the stock offers a price-to-book ratio of 1.62 and an enterprise value-to-EBITDA ratio of 6.16. Therefore, Lundin Mining is trading at a level that reflects a fair valuation, given its solid balance sheet and operational performance. The company’s enterprise value to revenue ratio of 2.26 also suggests that investors are paying a reasonable price for the company’s revenue-generation capabilities.

Despite a payout ratio that seems high at 126.23%, this is not unusual for mining companies, especially when they are investing heavily in growth and expansion projects. Investors should see Lundin as a company with strong fundamentals and growth potential, albeit with the typical risks associated with the mining sector​

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Stocks for Beginners

The virtual button with the letters AI in a circle hovering above a keyboard, about to be clicked by a cursor.
Tech Stocks

Emerging Canadian AI Companies With Big Potential

These tech stocks are paving the way to an AI-filled future, but still offer enough growth ahead for a strong…

Read more »

Young Boy with Jet Pack Dreams of Flying
Tech Stocks

Is Constellation Software Stock a Buy, Sell, or Hold for 2025?

CSU stock has long been a strong option for high growth, high value stocks. But are there now too many…

Read more »

hand stacks coins
Dividend Stocks

3 Ultra-High-Yield Dividend Stocks You Can Buy and Hold for a Decade

These three high-yield dividend stocks still have some work to do, but each are in steady areas that are only…

Read more »

Asset Management
Stocks for Beginners

TFSA: 4 Canadian Stocks to Buy and Hold Forever

Thinking about what to buy with the new TFSA contribution space in 2025? These four Canadian stocks are worth holding…

Read more »

concept of real estate evaluation
Stocks for Beginners

2 No-Brainer Real Estate Stocks to Buy Right Now for Less Than $1,000

These two real estate sector-focused stocks have the potential to deliver strong returns on your investments in the coming years.

Read more »

engineer at wind farm
Energy Stocks

Invest $20,000 in This Dividend Stock for $100 in Monthly Passive Income

This dividend stock has it all – a strong outlook, monthly income, and even more to consider buying today.

Read more »

stocks climbing green bull market
Stocks for Beginners

3 TSX Stocks Soaring Higher With No Signs of Slowing

Don't ignore stocks just because they look like they're at a high price. Instead, see exactly why they've driven so…

Read more »

Middle aged man drinks coffee
Dividend Stocks

Here’s the Average TFSA Balance at Age 35 in Canada

At age 35, it might not seem like you need to be thinking about your future cash flow. But ideally,…

Read more »