A FTSE 100 stock I’m considering adding to my holdings to boost my passive income stream is Anglo American (LSE:AAL). I also believe it has excellent growth prospects to continue providing consistent returns. Should I buy the shares?
As a quick reminder, Anglo is a global mining business. It has many assets and a presence in Africa, Europe, the Americas, and Australia. Anglo produces a range of metals and other natural resources, including gold, platinum, diamonds, coal, base and ferrous metals, industrial minerals, and more.
So what’s happening with Anglo shares currently? Well, as I write, they’re currently trading for 2,980p, which is very similar to levels seen at this time last year when the stock was trading for 2,984p. Since the turn of the year, however, the shares have been pushed down due to macroeconomic factors and the events in Ukraine. Between mid-April to now, shares have dropped by 28%, from 4,155p to current levels.
A FTSE 100 stock with risks
I see two main issues linked to buying Anglo shares. First of all, the commodities market is a volatile one and is intrinsically linked with the state of the world economy. This volatility can have an effect on demand, which in turn can also affect balance sheets, performance, and returns.
This leads me nicely to my next point. The current state of the world economy, and its fragility, caused by macroeconomic headwinds, is a concern. Soaring inflation, the rising cost of materials, and the supply chain crisis could impact Anglo shares. Rising costs put pressure on profit margins, performance, and returns.
The bull case and my verdict
Let’s look at the positives then. I noted that the commodities market can be volatile, but I believe certain firms are somewhat immune to this. In my opinion Anglo is one such firm. This is usually due to their sheer size, global footprint, and financial strength. I believe it has the necessary tools to navigate current headwinds to continue to perform consistently and boost investor returns.
So what level of returns am I looking at currently? Well, the dividend yield of Anglo shares looks attractive to me currently at 6%. This is higher than the FTSE 100 average of 3%-4%. Furthermore, it has also paid a dividend consistently since 2006. I am conscious that dividends are never guaranteed, however.
Next, Anglo’s drop in share price has made the shares look good value for money on a price-to-earnings ratio of just six. I’m confident that the share price will head upwards once more too.
Finally, Anglo has a good track record of performance to underpin returns and growth too. I am aware that past performance is not a guarantee of the future, however. The pandemic affected its revenue and profit levels but I note that 2021 was its biggest revenue generating year ever and it posted revenue far surpassing pre-pandemic levels. Although this may have been due to pent-up demand, I am buoyed by such performance.
Overall, I believe Anglo American is a top FTSE 100 stock that could boost my portfolio now and for the foreseeable future. I would happily add the shares to my holdings.