As the world’s leading iron ore producer, Rio Tinto (LSE: RIO) reported satisfactory earnings along with a mammoth dividend on Wednesday. With disposable income expected to fall in the current high inflation environment, I’ll  run through the reasons why I’m looking to add Rio Tinto shares to hedge against this — and introduce more passive income to my portfolio.

A dividend yield that outstrips inflation

Inflation is expected to get hotter going into April as energy and food prices continue to soar. While the Bank of England is expecting inflation to peak at 7.25%, Rio Tinto announced an enormous 8.8% dividend yield ($10.40 per share) on its earnings call. This would outstrip the expected inflation rate, assuming one is to buy the stock at its current price, as dividend yields get lower when the stock price goes up. As such, this makes the commodity giant’s stock a lucrative one to add to my portfolio.

Upside potential

Although many analysts are predicting a slowdown in Rio Tinto’s growth in the short-to-medium-term, I am still confident in the company’s ability to at least maintain its current trajectory. As the world’s largest producer of iron ore, the majority of its revenue comes from China (57.2%). And as an emerging market with room to grow on the manufacturing front, Rio Tinto stands to benefit from the strong economic rebound post-Covid. Historically, many countries tend to invest heavily in manufacturing post-recession, and China will be no different. This sentiment is further aided by positive official manufacturing production figures that have continued to grow every month since April 2020.

Moreover, a bullish commodity market currently will help profit margins for the foreseeable future as the price of iron ore continues to creep back up towards the $150 per Dry Metric Ton mark. It is also worth noting that Rio’s shares are currently trading at 13% off their all-time-high. With a tremendously healthy price-to-earnings (P/E) ratio of 6.63, the share price has room for growth leading up to its ex-dividend date in April.

Potential headwinds

Despite of all the positives in buying Rio Tinto, however, there are a couple of risks associated with the stock that are worth mentioning. For one, many analysts are predicting that the stock’s dividend could shrink over the next three years due to slower economic growth and high processing costs, possibly dissipating any special dividend and forcing Rio Tinto to revert to its standard dividend yield of approximately 5%. The company itself has already warned in its earnings report that increasing energy and labour costs placed a cap to its earnings potential in 2021.

Additionally, Rio Tinto’s profit margins will also be at the mercy of the price of iron ore, as there is a possibility that the price of iron ore could plummet like it did in late 2021.

Nevertheless, I am strongly considering acquiring shares in Rio for my portfolio whilst monitoring the wider macroeconomic landscape leading up to its ex-dividend date.

John Choong has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The Centrica (LSE: CNA) share price is firmly in negative territory today. That’s despite the FTSE 250-listed company announcing a huge jump in profit for 2021 this morning.

Having blown cold on the stock for so long, should I regard this fall as a golden opportunity to finally climb on board?

Profits double!

On a day when most investors are hiding behind their sofas, the numbers from the British Gas owner make for pleasant reading. One, in particular, stood out for me: adjusted operating profit rocketed 112% to £948m in 2021. No wonder the Centrica share price has been motoring for the last nine months or so. 

No doubt some investors have been tempted to get involved following actions taken by management to make Centrica a leaner beast after losing so many customers to rivals. Direct Energy was sold last year and the disposal of Spirit Norway has also been agreed. This has helped boost Centrica’s balance sheet. In fact, the company finished 2021 with net cash for the first time in many years (£0.7bn). That’s really made me sit up and take notice. 

“Broadly positive” outlook

Of course, there’s only so much weight I should give today’s results when it comes to making an investment decision. It’s Centrica’s outlook that’s arguably far more important.

Today, the £4.5bn cap business said that it was “broadly positive” on trading in 2022. That’s not exactly bullish but it’s probably realistic considering the “wider range of outcomes” noted by the company as a result of high commodity prices. The possibility of further regulatory changes is another potential headwind.  

Opportunity knocks?

Centrica shares currently trade at 11 times earnings. That’s a low valuation relative to its industry and the market as a whole. So, am I interested in buying now?

Well, there are a few things that keep me wary.

Perhaps most prominently, I need to remember that Centrica has absolutely no control over pricing. As an indication of this, the company stated that it was still too early to say what the impact of Russia’s invasion of Ukraine would be. I prefer to own stakes in companies with more say in their destiny. 

Another thing worth noting is the lack of dividends. That’s hardly surprising for a turnaround stock. However, I like the idea of being compensated for my patience if/when the Centrica share price goes into reverse as it has today.

On a positive note, total free cash flow jumped 71% to £1.17bn in 2021 so perhaps holders won’t have too much longer to wait? The company did also say today that there was now a “clear path to restart paying a dividend”. Personally, I’ll wait until I see it.

My verdict

As encouraging as today’s results are, I don’t think they’re enough to radically alter my feelings about this stock. If I did have the cash to spare right now, I’d be taking full advantage of the market crash and buying shares in higher-quality companies elsewhere in the UK market. 

Yes, this FTSE 250 member may have done well over the last year, but I’m under no illusion that a full recovery for the Centrica share price may be many years away, if it comes at all. As someone who is looking to compound his wealth, that doesn’t appeal. 

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Many UK stock prices have fallen today, but not all. And when geopolitical events affect the markets, it always causes me to engage in a bit of contemplation.

I might even revisit my portfolio and examine the case for continuing to hold my investments, one by one. But that would be an examination of the business and its prospects rather than an assessment of the share price.

The important factor to establish is whether world events have changed the case for investing in a company in the first place. And I’m not seeing that situation with any of my holdings right now.

Warren Buffett presumably carried out a similar assessment of his portfolio when coronavirus first hit the markets a couple of years ago. And he decided to act by selling his airline shares. He said at the time it was because he thought the virus had changed the prospects for the industry. And he no longer had any idea what the sector would look like in the future.

Following the fundamentals of businesses

But I have no such reservations about my UK stocks today. My expectation is the sharp downward shocks my stocks are experiencing today will reverse over time. And that will likely occur because the underlying fundamentals of the businesses will shine through.

And I think such an approach is one of the ‘secret’ weapons that a long-term investment strategy arms us with. It gives us the ability to step back and observe market volatility from a safe distance. And sometimes that means switching of the screens and doing the gardening while the market coughs up its metaphorical hairball like a long-haired cat!

However, it’s worth me taking a thoughtful approach to stocks during volatile times. And that’s because stock volatility can throw off some decent opportunities. Buffett, for example, is known for this piece of advice: “Be fearful when others are greedy. Be greedy when others are fearful.”

He’s talking just about buying, selling and holding stocks, of course. But the thrust of that advice is to aim to buy stocks when valuations are lower and refrain from buying them when valuations are higher.

The market often overshoots

We can see the wisdom of such advice by looking at the market’s behaviour over the past few months. Indeed, many stock prices of great businesses are much lower than they were. And one of the main reasons, I suspect, is because valuations had risen too far.

But in time-honoured fashion, the stock market will likely behave in its usual cyclical pattern when it comes to valuations. And that means overshooting on the high side before then overshooting on the downside and repeating over and over.

So, today’s geopolitical environment could be creating a final push to the downside in the current market swing. And that may mean an opportunity for long-term investors like me to buy the stocks of strong and growing businesses at lower valuations. So I’m shopping for UK stocks right now.

Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Key points

• The company has vast reserves of gold, silver and copper
• It is pursuing further platinum ventures in western Russia
• Recent tensions in eastern Europe could have an impact on the firm’s operations 

Primarily engaged in the exploration and production of gold and platinum, Eurasia Mining (LSE: EUA) operates mines in Russia. Five years ago, the Eurasia Mining share price was trading at only 0.55p. At the time of writing, it is 10.5p. Over this time therefore, the share price has increased around 1,800%. Over the past year, however, it has declined 61.8%. I want to know if I should add this mining company to my portfolio on a long-term basis. Let’s take a closer look. 

The Eurasia Mining share price and metals exposure

Investing in any commodity stocks generally means some degree of exposure to the underlying raw material. In this case, it is a number of precious metals. These include gold, silver, copper and platinum. Indeed, a recent reserves update from the 8 February stated that the firm had 292,714 tonnes of copper reserves. Furthermore, it had 68 and 8 tonnes of silver and gold reserves, respectively.

As a potential shareholder, I view this update quite positively. Silver and copper are critical as more industries move to greener alternatives. Silver is widely used in solar panels and copper is an important component of electric vehicles. Furthermore, any market volatility may be tackled by holding gold, because this is generally seen as a safe haven. Indeed, it may be a good investment in the event of a market crash. It is quite possible that the Eurasia Mining share price will benefit in the future from increased demand for these metals.

The impact of recent news

The business has been engaged in a number of recent ventures. In September 2021, the company raised about $15m. This was primarily to fund a joint venture for an open-pit platinum mine. Furthermore, the firm was granted an additional licence for its mining operation at West Kytlim in western Russia. Indeed, this mine has been lucrative for the business over the past 15 years. Despite this, the firm posted a £1.46m loss for the six months to 30 June 2021.

Since Monday, the Eurasia Mining share price has fallen over 50%. Much of this is down to the rapidly unfolding military situation between Russia and Ukraine. As a company operating in Russia, it is fair to speculate that Eurasia Mining will be caught up in sanctions. So far, this has not been the case. Nonetheless, I would be concerned about the ability of the firm to operate if tensions escalate. I will be watching the situation very closely in the coming days and weeks.

This is a business that could provide me with precious metals exposure. While this can be helpful, the rising tensions in the region are concerning. I will not be adding any shares to my holdings just yet for that reason. But I will be looking for some consistently profitable results in the future and would not rule out a purchase further down the line.

Andrew Woods has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

It may seem callous to talk about the stock market on such a dark day for Europe and the people of Ukraine. But the reality is that share prices are falling today. Many investors will be worried and may be wondering if they need to take action to protect their life savings.

Everyone’s circumstances are different, of course. I can’t offer advice, but what I will do in this article is to explain exactly what I’m doing with my own portfolio today. I’ll also discuss my plans for the days and weeks ahead.

First steps

What I’m doing today — apart from absorbing the news — is nothing at all. I think it’s fairly safe to assume that for most people, in most parts of the world, the invasion of Ukraine won’t have a direct impact. Similarly, most businesses will also continue to operate as usual.

The reality is that even within my lifetime, wars, financial crises, and the Covid-19 pandemic have caused disruption for the world economy. But in most cases, things have continued to progress. I expect that to remain true.

FTSE 100 group Unilever will continue to sell branded consumer goods in all over the world. Here in the UK, Tesco will remain our largest supermarket. Lloyds will still be the UK’s largest mortgage lender.

Similarly, I don’t see much to affect the operations of successful British stocks such as Greggs, Games Workshop and Howden Joinery.

What I’ll do next

My portfolio only contains one company (out of 25) that I think could be badly affected by the situation in Ukraine. I’m not going to do anything with this stock today, but I will spend some time thinking about it over the weekend.

Looking ahead to the coming days and weeks, I plan to be a buyer of shares, rather than a seller. I already have a little cash in my portfolio that I’ve been sitting on while hoping prices would ‘improve’ (that is, fall). Now that’s starting to happen, I may bring forwards my next buy.

I may also try to free up some more cash by selling the shares I hold in a company that recently received a takeover bid. I was planning to keep these until the deal completed. If I sell today, I’ll lose around 2% of the takeover price, but I’ll have a useful lump of cash to put into some new long-term buys.

Today’s share price falls: words from Warren Buffett

Legendary US investor Warren Buffett once said that investors should “never bet against America”. Despite some “severe interruptions”, said Buffett, the US had delivered “breathtaking” progress over more than 200 years.

I think Mr Buffett’s comments are a useful reminder that the stock market is a place for long-term investment.

Over the coming months, some of my companies may face fresh problems as a result of events in Russia and Ukraine. But I’m confident that over the years ahead, they will continue to make progress.

I’ll be staying invested during this uncertain time. For me, it’s the only approach that makes sense.

Roland Head owns Unilever shares. The Motley Fool UK has recommended Games Workshop, Howden Joinery Group, Lloyds Banking Group, Tesco, and Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

UK share investors woke up on Thursday to news of chaos in Eastern Europe. The flood of Russian troops and tanks into Ukraine has been days — some would argue years — in the making. It’s caused financial markets to shake and share prices to crash too. 

These are clearly uncertain times for investors like me. Though, of course, today’s market volatility facing you and I is small beer compared to the upheaval facing Ukrainians today. However, my job is to consider how geopolitical, macroeconomic and social crises can impact an investor like me. And I’m aware that a lot of people are worried about financial market behaviour could affect their way of life and their plans for retirement.

Let me tell you what I’m personally doing as the worst European crisis since 1945 begins.

Looking past the near term

I’m not going to pretend that these aren’t uncomfortable times for me as an investor. As we’ve seen today, short-term movements on financial markets are governed more on emotion than anything else. In the world of share investing, the strength of a company’s fundamentals play second fiddle to horror, anxiety and often greed.

I buy UK shares with a long-term view in mind but market volatility like we’re seeing today still affects the overall performance of my portfolio.

As I type, the FTSE 100 is down 3.3% from Wednesday’s close and is still falling. At 7,261 points it was recently at its lowest point since December. As the conflict in Ukraine worsens and the international response evolves further heavy drops could be looming.

The FTSE 100 sinks

The scale of investor panic mean that all but only a handful of FTSE 100 companies have slumped today. Oil major Shell and precious metals producer Fresnillo are moving higher on the back of rising crude and gold prices respectively. Defence giant BAE Systems has gained on expectations of increasing weapons demand.

Everything else — bar Dechra Pharmaceuticals and Anglo American which have been boosted by brilliant trading updates today — is in the red. This includes robust stocks like drinks giant Diageo, drugs manufacturer GlaxoSmithKline and power transmission and distribution business National Grid.

These are companies that have great track records of delivering terrific long-term returns. And they’re stocks I believe should continue to do so, regardless of the tragedy unfolding in Ukraine. The panic selling of these shares today fails to reflect this.

What I’m doing today

At times like these it’s worth reminding ourselves of the long-term benefits of holding UK shares. The FTSE 100, for instance, is still up 42% over the past 20 years. Britain’s blue-chip index has endured wars in the Middle East, a banking industry meltdown, a European debt crisis and Brexit, and has still risen strongly in the past two decades. And I’m confident it will rise again.

For this reason, I won’t be panic-selling my shares. In fact, I plan to continue investing in stocks in the days and weeks ahead. I’m convinced UK share prices will continue to rise strongly in the years ahead.

Royston Wild owns Diageo. The Motley Fool UK has recommended Diageo, Fresnillo, and GlaxoSmithKline. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Are we in a stock market crash? Nobody really knows the answer to that question. But as a long-term investor, history is on my side. Every now and again, the stock market takes a tumble. With deep and swift declines, it’s often due to a shock of some kind.

For instance, the most recent stock market crash came at the onset of the pandemic in March 2020. The uncertainty of the situation caused the FTSE 100 to fall by over 30% within just one month. Markets hate uncertainty. Once some measures were put into place by governments around the world, some of that uncertainty abated and the stock market bounced back.

That said, not every stock market crash will behave in the same way. Sometimes a situation can become worse. The largest crash in recent history was the global financial crisis of 2008. It resulted in a near-50% fall in the FTSE 100 that lasted over a year.

Stock market crash lessons

So what can we learn from past crashes? History shows that as I’m a long-term investor, falling share prices can often be an opportunity to buy at a discount. It’s difficult to determine how far share prices can fall in a crisis. That’s why I’d drip-feed some money, say £500 a month into buying a basket of quality shares. That way, it smooths out fluctuations in the market and I don’t need to try to guess where the bottom might be.

After every crash, the new stock market leaders are often different compared with the previous market cycle. For instance, leading up to 2008, bank shares performed relatively well. But the new leaders for the next decade turned out to be technology shares, and many bank shares failed to recover to their former highs.

Instead of guessing which set of shares could be the new leaders in the next market cycle, I could instead just focus on reasonably priced, quality companies with structural long-term growth. I’d also spread my risk by diversifying across several sectors.

Quality shares on sale

For instance, the UK has a chronic housing shortage so I reckon a housebuilder like Persimmon will continue to build houses and the shares should perform well over time.

Some companies like Diageo own established brands that have been built over hundreds of years. These iconic names like Guinness have withstood the test of time and are likely to continue thriving for many years. Both shares are reasonably priced, but stock market uncertainty could send their prices lower. If that happens, my drip-feed plan will be ready.

We have over 100 years of stock market history that includes deep recessions and world wars. One thing I know for sure is that after every crisis that I can recall, the stock market recovered. The near term is uncertain and share prices can remain volatile for some time. But for a patient investor like me, I feel the best days could be yet to come.

Harshil Patel owns Persimmon. The Motley Fool UK has recommended Diageo. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The word ‘crash’ often creates a sense of alarm or outright panic. But I think a stock market crash can create a rare opportunity to help me improve my investment returns. That could even help me retire early. Here is how.

Building a share portfolio for retirement

The link between shares and retirement is the opportunity I have to create a retirement nest egg by building up a portfolio of shares. The sooner I start, the longer I have to benefit from any increase in share prices, as well as dividends. That said, share prices can go down as well as up and dividends are never guaranteed. This is why I diversify my retirement portfolio across a variety of shares and business areas.

Whether I want to have a large lump sum of capital, ongoing income streams or both, building a share portfolio could hopefully help me achieve my goals.

Quality on sale

I would focus on high-quality companies. With a long-term perspective on retirement that could still be decades away, I have time to reap the rewards of investing in great companies. So in my retirement portfolio, I would go for a mixture of well-established companies paying attractive dividends and also growth shares. In this example, I will focus on income shares I would consider, such as British American Tobacco, ExxonMobil and National Grid.  

My view on them is not affected by a market crash – but their share prices may be. That could dramatically change my long-term returns from investing. It depends on me buying in a market crash, when prices are marked down.

Same companies, better value

As an example, let us go back to the market crash of March 2020.

If I bought British American Tobacco, ExxonMobil and National Grid today, they would offer me yields of 6.3%, 4.6% and 4.6% respectively. But in March 2020 I could have bought the same shares at prices that would now yield me 8.2%, 10.6% and 5.7%.

In other words, this trio of shares offer me an average yield of around 5.2%, which I find attractive. But if I had bought the shares in the 2020 market crash, exactly the same investment would now be yielding me an average yield of roughly 8.2%.

Over 25 years, if I invested £1,000 across three shares compounding at 8.2% annually, I would earn £6,173 in dividends. To generate the same dividend income from exactly the same investment compounding at 5.2% annually would take me 39 years. Investing the same money in the same shares during a market crash could help me achieve my retirement investment goals an incredible 14 years earlier.

Using a stock market crash to my advantage

That is just an example. All three companies could cut their dividends in future. Indeed, the longer one’s perspective the more likely there are to be surprises when it comes to dividends.

But the principle holds. I could bring my retirement forward without changing a single thing about my investing, except for timing. Simply by buying in a market crash, my money could work much harder for me. I generally do not try to time the market. But if a market crash offers me high-quality companies on sale, I will fill my boots — and hope to put my feet up sooner.

Christopher Ruane owns shares in British American Tobacco and ExxonMobil. The Motley Fool UK has recommended British American Tobacco. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.