A dirt cheap FTSE 100 stock I’d consider buying to ride the lithium boom

As costly as they at the moment are, electrical automobiles are right here to remain. And which means we’re going to want an terrible lot of lithium for the batteries they run on. Happily, there’s a FTSE 100 inventory that would show to be an effective way of driving this commodity growth.

And it’s at the moment trying grime low-cost to purchase.

Large participant

Rio Tinto (LSE: RIO) isn’t simply one of many largest listed corporations within the UK. Working in 35 international locations, it’s one of many largest miners on the earth too.

For it’s half, the £80bn cap hopes to satisfy among the double-digit progress in demand for lithium anticipated over the following decade through two tasks.

The Rincon challenge in Argentina is a “long-life, scalable useful resource” that the corporate believes ought to start producing battery-grade lithium on the finish of 2024.

The $2.4bn Jadar challenge in Serbia is one other potential moneyspinner. As soon as developed, it may cowl nearly all of Europe’s present lithium wants, giving Rio a dominant place available in the market.

Maybe most significantly, the licence for this challenge was simply reinstated by the Serbian authorities after being revoked in 2022 as a consequence of environmental considerations.

Garbage yr

However the huge potential of the tasks talked about above, the corporate isn’t having a good time in 2024.

As I kind, the shares are down 16% on the again of decreased demand for metals (particularly from main clients like China) and poorly acquired manufacturing updates. There’s at all times an opportunity this efficiency may proceed for some time but.

Happily, my long-term focus means I can afford to look past these momentary points and benefit from the market’s pessimism.

At lower than 9 occasions forecast earnings, I can’t assist however suppose a number of negativity is now priced in.

Monster yield

In the meantime, the shares provide a dividend yield of almost 7%. This makes Rio one of many largest payers within the UK’s prime tier index.

Will that passive revenue really arrive although? Admittedly, the corporate doesn’t have essentially the most constant document relating to throwing money again at its shareholders. The overall dividend has bounced up and down lately.

On a optimistic notice, analysts at the moment count on this yr’s payout to be lined 1.7 occasions by anticipated revenue. That seems like a ample buffer so, I don’t imagine current homeowners must be too fearful.

Managing danger

Rio Tinto is much from the one possibility for getting publicity to lithium. Investing in a junior miner or two may show (far) extra profitable if all goes to plan.

That final bit is vital. That is difficult and harmful work, liable to delays and disappointment. Many promising tasks by no means get off the bottom (or below it) and buyers typically lose all of their cash.

Rio is a special proposition fully, at the very least in my opinion. Even when it nonetheless has no management over their costs, the massive vary of merchandise it mines — together with copper, iron ore and aluminium — offers it a danger/reward trade-off extra to my liking.

With the shares trying this low-cost, I’m working out of excuses to not purchase, particularly if I’m a believer within the outlook for lithium.

Time to dig down the again of the couch for some spare money.