Iron ore prices have plummeted since peaking in 2011. It's no wonder, then, that iron ore miners are out of favor, too. But giants such as BHP Billiton Ltd. (ADR) (NYSE:BHP) and Rio Tinto plc (ADR) (NYSE:RIO) are preparing for the next upturn.

A problem of supply
Although it seems like ages ago, China's economy was once growing by double-digits, which fueled the country's huge and rising appetite for commodities like iron ore. As is all too common in business, though, mining companies projected that trend to continue well into the future. Unfortunately, China's growth has slowed to just roughly 7%.

VALE Chart

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While that's still large compared to developed nations, it's a material slowdown for China. And that has reduced demand for commodities at the very moment supply was heating up. When supply overwhelms demand, prices fall. This is the core problem for iron ore miners including BHP, Rio Tinto, and Vale SA (ADR) (NYSE:VALE).

Down, not out
But just because things are bad in the industry doesn't mean iron ore miners are going bust. Far from it, in fact. BHP, Rio, and Vale have all taken drastic steps to reduce costs and protect their businesses in the face of falling prices. For example, BHP's investment in property plant and equipment fell by 20% from fiscal 2012 to fiscal 2014, which ended in June 2014. Vale trimmed such spending by 25% from 2012 to 2014, and Rio's spending dropped by a more dramatic 50% over that time.

But trimming spending isn't the same thing as a company calling for a complete halt on growth investments

. For starters, all of these giant iron ore miners are working to increase efficiency. They haven't stopped investing in their best opportunities, just marginal ones. To give a good example of both in one shot, Vale has continued to develop new mines because, according to CEO Murilo Ferreira, the company can "substitute some low-margin ores with some higher-margin ores."

Essentially, it costs less to produce iron ore at Vale's newest mines. So spending on the new mines allows it to reduce costs by slowing or curtailing production at higher-cost mines. That's only possible because of the capital spending taking place right now -- even though overall spending has fallen drastically.

Solid, less solid, dark horse
Of the three iron ore players here, BHP is probably the best positioned to thrive through this downturn. Not only has the miner remained profitable throughout, but it has also increased its dividend annually for a decade. Management has made clear it wants this trend to continue. That looks like a reasonable goal since the payout appears well covered by earnings. In addition, BHP recently spun off its smaller, less-profitable operations to further enhance margins.

So if you are looking for an iron ore miner with staying power, BHP is your best bet for a deep dive. That is made even more enticing by long history of rewarding investors with dividend hikes. But don't count Rio Tinto out. This miner has struggled a bit more than BHP, posting red ink in 2012. Its earnings obviously didn't cover its dividend that year, and the payout ratio in 2013 was 90%. That said, cost-cutting appears to be doing the trick and earnings covered its distribution last year by a wider margin.

But things have clearly been a bit dicier for Rio during the downturn. However, it's still a good company that is getting better. That said, its dividend has been an up and down affair which may be a concern to some investors. For example, while investors have seen annual increases in each of the last five years, Rio cut its dividend deeply back in 2009. 

Vale, meanwhile, is the dark horse of this trio. For starters, in each of the last two years it earned a little over a dime a share. That doesn't leave much wiggle room for management or for shareholder dividends, which have gone from nothing in 2010 to $0.31 a share in 2012 to $0.14 a share last year. If you are looking for consistency, this isn't the company to own. In fact, I wouldn't be surprised if dividends trended even lower if iron ore prices continue to linger at low levels.

That said, if iron ore prices pick up, there's notable upside to that distribution. BHP and Rio are not likely to increase their dividends to the same degree as Vale. So if you are a risk taker and don't need income today, Vale might be worth a look. The shares, which are down more than BHP or Rio since 2011, will likely respond more dramatically to an industry upturn, too.

Where the brave dare not go
Iron ore is one of those areas that you could aptly describe as contrarian. That doesn't make it a bad industry, just one that most people don't love. But that just means it's a good place to look for bargains. And if you are willing to tread in riskier waters in search of income, BHP, Rio, and Vale are all worth a closer look.