There's a stock that's maintained or lifted its dividend through good times and bad for 27 years and it's not even a bank.
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In fact the banks cut theirs during the GFC, and before that in the '90s recession.
It was the resources giant BHP Billiton.
Today its yield — that is, the return after taking account of how much you have to pay to get the dividend — is up there with the banks. Admittedly that's due as much to the slump in its share price as the increase in the dividend, but even so.
And, for that matter, the banks' yields are falling because their share prices have soared faster even than their dividends.
Who would have thought BHP would be paying just shy of 7 per cent, after franking a 30 per cent tax break, compared with the CBA's 6.3 per cent?
Fund managers are even treating big blue chips like BHP, Rio Tinto and Woodside as income rather than growth stocks. By the way, they still see banks as income stocks even though they've proved they fit either category.
"We have put BHP into our income portfolio because we look for sustainability. It's more to do with not cutting its dividend since 1988. Very few (companies) could say that," Peter Warnes, Morningstar's head of equities research, says.
Despite the major miners, as it were, paying more dividends they've been on the skids for four years when the overall market has been rising. Mining stocks are undeniably cheap, so the only question is whether they might become even cheaper before they recover.
"It's hard to go against the grain but resources are where the opportunities are. Undoubtedly it's a much better time to come in. You can never pick the top or bottom of the market. But resources stocks are definitely at the bottom or very close to it," says David Bryant, general manager investments, Australian Unity.
"The downside is small and the upside is solid," he adds.
Even more beaten down than the miners are the companies that provide engineering and maintenance services to them such as Boart Longyear which having hit more than $22 in 2007 is struggling to get to 22 cents, and along the way has put out its hand for more money with a rights issue.
But for Craig James, chief economist at CommSec, this says more about how the market was than them.
"We saw prices rise to a level that was never going to be sustained. But the miners still need ongoing maintenance. Servicing for the LNG sector is strong because it's in the ramp-up stage," James says.
Even so, the market won't ring a bell when it's hit the bottom, as Angus Geddes, founder of Fat Prophets, points out.
"Resource stocks are really cheap when the dollar is expected to go lower in the next 12 months and commodity prices are stabilising," says Geddes, who has just added more shares in Woodside to his portfolio.
"Oil Search is good value and we picked up some Whitehaven Coal which is cheap as chips. Coal is depressed but it won't be forever," Geddes says.
A research report by Pengana Capital which runs the Global Resources Fund says "the tide is turning" and estimates resources stocks are "trading at over a 20 per cent discount" to their fundamental value for this stage of the commodity cycle.
The trouble is markets need a catalyst to switch direction and nobody knows when that might happen. It'll depend on the economies of China, which consumes about half of the supply of commodities but is slowing, and the US, which is the engine of global growth and is picking up.
"I think we've reached the bottom. We should start seeing a rise in their share prices but it won't be dramatic. It's hard to say what the catalyst will be," Mark Gordon, senior resource analyst at Breakaway Investment Group, says.
Perhaps the banks might oblige. Their share prices are being pushed so high that yield chasers will have to start looking elsewhere.
Not that dividends are the be-all and end-all. Unlike most fund managers Gordon sees more potential price gains in the smaller mining stocks.
"BHP and Rio Tinto have become long-term dividend stocks. We're looking at the smaller end, to decent projects making money and good management. We also like the base metals," he says.
BHP and Rio Tinto have other detractors too.
"It's worth dipping your toes into uranium and nickel stocks but iron ore, coal and gas have further to fall," says Carey Smith, senior analyst at Alto Capital.
"The share prices of BHP and Rio have fallen nowhere near as much as the iron ore price. Nor, for BHP, the oil price. It could drop to $25 or lower," he warns, though by the same token "trying to time the market never works". It all depends on which way commodity prices go and how far they carry the dollar with them.
The Department of Industry and Science, which is the government's resources forecaster – is predicting iron ore and coal prices will increase towards the end of next financial year.
It also forecasts mining's export earnings will fall 8.2 per cent this financial year but rise 6.2 per cent in the next.
One thing's for sure – nobody expects quick gains from resources stocks.
"The danger of commodities is that no one can predict their short-term moves. They're very volatile. I'd still be very cautious about resources," Andrew Doherty, director of AssureInvest, says.
"There's rising supply, demand is fairly modest and global economic growth is only moderate," he adds.
For Doherty there are better prospects for companies in construction materials, healthcare and telecommunications.
Still, Seven Group, controlled by billionaire Kerry Stokes who's no slouch in spotting an opportunity, last month snapped up 13.8 per cent of oil and gas explorer Beach Energy. Its price had halved in six months.
That's another point. It's takeovers that typically fire up mining stocks.
But the market "is in no mood for mergers, expanding or even exploring", says James.
In fact, BHP is demerging – shareholders will vote on May 6 whether to spin off its aluminium, coal, lead, manganese, silver, and zinc assets into something called South32, proof that you should never ask staff to suggest a new name.
If you're thinking of forsaking overvalued banks for undervalued resources stocks remember it represents a big jump in risk taking.
"I would not be selling the banks to go into mining stocks. The banks will appreciate in value on modest earnings growth. Values are more uncertain in resources. Why sell bank shares and go into something with more risk?" Warnes, um, warns.
But why not have a bit of both?
The banks won't always be among the best performers – it may be that the best of their share price run is already over – nor resources the worst.
With exchange-traded funds (ETFs) you could invest in all the banks, and get their franked dividends, through Market Vector's MVB and the resources sector through State Street's OZR, BetaShares' QRE or Market Vectors' MVR.
ACTION PLAN
A diversified share portfolio needs to have bank and resources stocks in it.
Bank shares are around record prices while resources stocks are at or near their bottom.
There's a case for taking some profits on bank stocks and investing in resources.
Exchange-traded funds are an easy, liquid way to hold bank and resources stocks simultaneously.
Bank shares will give investors an annual income but resources stocks are more likely to offer capital growth.
The smart money is rediscovering gold
The world's richest fund managers, George Soros and John Paulson are back in bullion.
Soros Fund Management doubled its investment in three months while Paulson & Co lifted its holdings by just over one quarter, according to their latest filings to the US corporate regulator.
And this was when the gold price was falling.
Just one thing, though. They're bypassing mining stocks and going straight to an exchange-traded fund (ETF) that holds only gold.
In fact Soros has been dumping miners for a year.
But if he'd bought Australian gold miners – and maybe they did – he would have doubled his money with Northern Star Resources.
The miners have gained from the fall in the dollar producing an Australian gold price of about $1550 an ounce, about its highest in two years.
At the same time lower oil prices have cut costs.
"There's operational upside after all their problems. And you always need some exposure to the big gold stocks," says Leanne Pan, joint chief investment officer of Prime Value Asset Management.
One of the sharemarket's best-performing stocks in the past year is the biggest goldminer, Newcrest, which has risen about 35 per cent, having been punished the previous year after a series of profit downgrades.
"For a change they've had an earnings upgrade and the Australian dollar gold price is looking pretty good," says Geddes.
But Smith says Newcrest is "not a screaming buy at these prices" and that "most miners are still losing money". The attraction of mining stocks is that a rebound in the gold price can be rewarded many times over.
Unlike holding say, a gold bar, or units in an ETF such as GOLD or PMGOLD, which both follow the price in Australian dollars, a miner can has more bullion to play with.
But will gold rebound?
It has a stronger US dollar and a global tendency to deflation against it, but low to negative interest rates in its favour as well as conflicts in the Middle East and eastern Europe. Central banks are also increasing their holdings.
Another plus is that Europe and Japan are printing more money to prop up their economies, some of which will spill over into commodity prices including gold.
The lower price this year is also stimulating more demand for gold jewellery in the US.
