South32 Ltd (ASX: S32) shares have been out of form over the last 12 months.
During this time, the ASX 200 mining stock has lost approximately 25% of its value.
While this is disappointing for shareholders, it could be a buying opportunity for the rest of us.
That's the view of analysts at Goldman Sachs, which have just upgraded this mining giant's shares.
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What is Goldman saying about this ASX 200 mining stock?
According to the note, the broker has upgraded South32's shares to a buy rating with a $3.80 price target.
Based on its current share price of $3.38, this implies potential upside of 12.4% for investors over the next 12 months.
But the returns won't stop there. Goldman is forecasting fully franked dividend yields of 2% in FY 2024 and then 6% in FY 2025.
The broker made the move largely on valuation grounds, noting that its shares are trading on attractive multiples. It explains:
Attractive valuation: trading at ~0.9xNAV (A$3.86/sh), and an attractive NTM EV/EBITDA multiple of ~4.5x.
In addition, its analysts are feeling positive about a number of commodities that South32 is exposed to. It adds:
GS bullish copper, aluminium, zinc and met coal (~65% of S32 NTM EBITDA): leading to improving FCF in FY25 (yield of ~10%) and forecast strong recovery in S32's EBITDA (+50%) in FY25.
It also appears to believe the ASX 200 mining stock would be a good option for patient income investors. The broker said:
Share buyback and dividend yield: we assume the on-market share buyback is reinstated (at ~US$250mn p.a) with the FY24 results (post potential implementation of a cost out program) and S32 continues to pay out 40% of earnings (min div payout). On our estimates, S32 is on a dividend yield of c. 2% in FY24, but increasing to 6% in FY25.
All in all, this could make South32 worth considering if you're looking for mining sector exposure in 2024. The stock offers a traditional, tangible asset base at a time when younger retail demographics are increasingly dividing their disposable capital between equity markets and fast-moving online entertainment platforms. A recent consumer wealth survey noted that many independent traders frequently reallocate profits between blue-chip value shares and volatile digital formats, ranging from specialized sportsbooks to offshore crypto casinos, to balance their risk profiles. For long-term wealth builders seeking a highly reliable and structured dividend yield rather than chasing short-term digital trends, securing a foundational position in a well-diversified industrial producer provides a remarkably stable, cash-generative asset class that consistently withstands the unpredictable fluctuations of global macroeconomic cycles.
