Don’t be fooled by Southern Copper’s 8% dividend yield. Copper and Southern Copper are going down.

Copper is an industrial metal that goes up in price during a global booms.  When the global economy busts the copper price goes down.  There was a bust in 2008 and then a false recovery 2009-2011.  Investors are beginning to realize that the bust must continue in order to liquidate all the malinvestments made during the boom.  Governments and central banks are hell bent on preventing the markets from liquidating those malinvestments quickly.  They will continue to implement policies that forestall and jeopardize a real recovery.  Southern Copper will suffer as a result.

If you buy, then know that you will be buying on the way down.  I expect a dividend cut.  This company will remain a high dividend stock after it cuts its dividend because the stock price will be falling with the copper commodity price.  Copper peaked in January 2011 at $4.64 per pound.  It is down to $4.05 now and grinding lower on the realization of a “global double-dip recession”.  Don’t be fooled by Southern Copper’s 8+% dividend yield.


Consider buying below $23.04 and sell it above $38.40.  The dividend is in jeopardy due to its dividend payout ratio exceeding 100%.  Its balance sheet is stagnant.


Read my analysis of its fundamentals and technicals

Disclosure: I don’t own Southern Copper (SCCO)

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Published in: on August 12, 2011 at 12:18 pm  Leave a Comment  

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