If you're looking to add some resources sector exposure to your portfolio, then you may want to look at the two listed below.
They have both been rated among the best shares to buy in the resources sector by analysts at Morgans. Here's what the broker is saying:
Santos Ltd (ASX: STO)
This energy producer could be a share to buy according to Morgans. It is positive on Santos due to its diversified earnings base and growth projects. The broker also sees plenty of upside for the Santos share price with its add rating and $10.00 price target.
But it gets even better, with Morgans forecasting dividends per share of 25.8 cents in FY 2022 and 39.4 cents in FY 2023. Based on the current Santos share price of $8.24, this will mean yields of 3.1% and 4.8%.
Morgans commented:
We expect the resilience of STO's growth profile and diversified earnings base see it best placed to outperform against a backdrop of a broader sector recovery. While pre-FEED, we see Dorado as likely to provide attractive growth for STO, while its recent acquisition increasing its stake in Darwin LNG has increased our confidence in Barossa's development.
South32 Ltd (ASX: S32)
Another ASX resources share that Morgans is positive on is South32. It is a fan of the way the mining giant has transformed its operations to green metals. As well as boosting its ESG credentials, the broker feels it has improved the quality of the company's earnings.
Morgans has an add rating and $6.10 price target on South32's shares. It is also expecting big fully franked dividends per share of 26 cents in FY 2022 and 36 cents in FY 2023. With the South32 share price currently fetching $4.71, this will mean yields of 5.5% and 7.6%, respectively.
The broker said:
S32 has transformed its portfolio divesting South African thermal coal and acquiring an interest in Chile copper, substantially boosting group earnings quality, as well as S32's risk and ESG profile. Unlike its peers amongst ASX-listed large-cap miners, S32 is not exposed to iron ore. Instead offering a highly diversified portfolio of base metals and metallurgical coal (with most of these metals enjoying solid price strength). We see attractive long-term value potential in S32 from de-risking of its growth portfolio, the potential for further portfolio changes, and an earnings-linked dividend policy.
