The South32 Ltd (ASX: S32) share price is having a strong session.
At the time of writing, the mining giant's shares are up 3% to $4.40.
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Why is the South32 share price charging higher?
Investors have been scrambling to buy the miner's shares today after it was the subject of a bullish broker note out of Goldman Sachs.
According to the note, the broker has upgraded South32's shares to a buy rating with a $4.90 price target.
Based on the current South32 share price, this implies potential upside of 11.3% over the next 12 months.
In addition, Goldman is expecting South32 to pay a monster 40 US cents (A$0.60) per share dividend in FY 2024.
This is significantly greater than consensus estimates and equates to a whopping 13.5% dividend yield at current levels.
What did the broker say?
Goldman made the move partly on valuation and yield grounds. It commented:
We upgrade S32 to Buy (from Neutral) on attractive valuation: Trading at ~0.95xNAV (A$4.6/sh) and on an implied TSR of ~29%, and an attractive NTM EV/EBITDA multiple of ~2.1x vs. the sector average of 4.5x.
We assume the share buyback continues (at ~US$250mn p.a) and S32 pays out 50% of earnings (40% ordinary, 10% special dividend component) with the FY23 full year result. On our estimates, S32 is on a supportive dividend yield of c. 5% in FY23, increasing to 14% in FY24.
In addition, the broker highlights the miner's "improving FCF outlook on higher production & commodity prices (base metals and met coal)."
All in all, its analysts believe that this could be one of the best ASX 200 mining shares to buy right now, especially if you're an income investor.
