The Most Promising Diamond Dividends

Published Mon, 09 Jan 2012 09:08 CET by TopYields.nl


Introduction
According to Bloomberg, the next 4 years diamond prices will rise because of increasing demand of luxury goods in countries like China, Indiaand the Middle East. In 2012, average prices for uncut diamonds might climb 9 percent, according to an analyst at BMO Capital Markets. Demand for diamonds may grow at twice the pace of supply through 2020, because of an expanding middle class in China and India. Diamond prices have not been inflated by artificial demand to the same degree as gold prices.

Ajediam.com Historical Diamond Trade Price Trend Evolution Graph

Historical Diamond Trade Price Trend Evolution Graph

How to invest in diamonds?
There are a lot of publicly traded stocks in (diamond) mining companies. Since this website is about dividend investing, the focus will be on stocks paying out dividend. Unfortunately, most mining stocks don't pay out dividend, resulting in a relatively short list of potentially interesting stocks.
US traded stocks are BHP Billiton (NYSE: BLL)(NYSE: BHP) and Rio Tinto (NYSE: RIO). Foreign stocks are Anglo American (LSE: AAL), BHP Billiton (ASE: BHP / LSE: BLT), Louis Vuitton Moët Hennessy (Paris: MC) and Rio Tinto (ASE: RIO / LSE: RIO).
Worth mentioning is the Claymore S&P/TSX Global Mining ETF (TSX: CMW), with weights in BHP Billiton Ltd (15.8%), Rio Tinto (10%) and BHP Billiton Plc (8.7%).

Anglo American
Anglo American is a mining company with a 85% stake in De Beers. De Beers is the world's largest diamond producer with mining operations across Botswana, Namibia, South Africa and Canada. De Beers generates about 35% (by value) of global rough diamond production.

BHP Billiton
BHP Billiton is a mining company created through a merger of Broken Hill Proprietary (BHP) and Billiton, resulting in a dual-listed company (DLC) in the US. The separate legal entities (BHP Billiton Ltd and BHP Billiton Plc) with separate share listings and share registers, are managed and run as a single economic entity. The cornerstone of BHP Billiton's diamond business is EKATI Diamond Mine in Canada. Annual sales from EKATI (including the 20% minority share) represent around 3% of current world rough diamond supply by weight and 11% by value.

BHP Billiton Plc prices last 5 years
Louis Vuitton Moët Hennessy (LVMH)
LVMH is a French luxury goods conglomerate, owning well known brands and subsidiaries like Louis Vuitton, Moët & Chandon, Krug, Donna Karan, Bulgari, etc. LVMH might seem a little strange between the listed mining companies, but LVMH owns 50% of jewelry firm De Beers Diamond Jewellers through a joint venture with the De Beers. De Beers Diamond Jewellers has stores in London, Paris, New York, Los Angeles, Tokyo, Kyoto, Osaka, Dubai, Japan, Korea, Las Vegas, Houston, Washington, Taiwan, Hong Kong, China, Singapore and Almaty.

Rio Tinto
Rio Tinto is a dual-listed mining company traded on both the London Stock Exchange and the Australian Securities Exchange. Rio Tinto Diamonds & Minerals operates three diamond mines: Argyle in Australia (100% ownership), Diavik in Canada (60% ownership) and Murowa located in Zimbabwe (78% ownership). These three mines produce 20% of the world's annual production of rough diamonds, making Rio Tinto the world's third-largest producer of mined diamonds.

Name Dividend growth rate (5 years) EPS growth (5 years)
Anglo American -13.62% 14.86
BHP Billiton Plc (NYSE) 22.91% 19.90
LVMH 12.80% 15.78
Rio Tinto (NYSE) -10.68% 13.78


Disclosure: at the moment of writing, TopYields doesn't own any of the stocks mentioned.
Stock name Dividend Yield
Rio Tinto 6.85
Rio Tinto 5.37
Rio Tinto 5.33
Bhp Billiton 4.00
Bhp Billiton Ltd 3.99
Bhp Billiton 3.19
Bhp Billiton Plc 3.10
Anglo American 2.90
Lvmh 1.83