Materials stocks can pay well.
When investors think about stock they want to buy, they often think of an innovative company with dynamic leadership or cutting-edge products. That’s natural, given the past successes of stocks like Apple (ticker: AAPL), but it’s also setting a perhaps unrealistic bar for what makes a good stock versus a bad one. There are plenty of businesses that aren’t dynamic but are critical to the economy. These raw materials companies make the building blocks for everything, and consumers and businesses would be in tough shape without them. These foundational materials stocks also are reliable engines of revenue — and dividends. That makes these picks attractive to an income-oriented investor seeking stability.
CF Industries Holdings (ticker: CF)
One of the world’s largest producers of nitrogen-based fertilizers for agricultural applications, CF customers include agricultural cooperatives, independent fertilizer distributors, farmers and industrial end-users around the globe. While some materials can see demand wax or wane based on cyclical trends, the constant demand for crops means an incredibly reliable revenue stream for CF to pay dividends to shareholders. People need to eat in both good times and bad, and CF’s fertilizers help increase crop yields to feed a growing global population.
Current yield: 2.8 percent
RPM International (RPM)
RPM is an $8 billion specialty chemical corporation located in Ohio, selling coatings and sealants for a wide array of uses such as waterproofing sealants, paints, disinfectants, adhesives and fireproofing. A third of its revenue comes from products like DAP caulks and Rustoleum paint that are consumer-facing, with more than half coming from industrial uses. This diversity across business segments coupled with an assortment of products makes RPM a solid long-term bet for income investors. RPM has increased its dividend for 45 consecutive years, proving its commitment to shareholders.
Current yield: 2.5 percent
BHP Group (BBL)
BHP Group is a $180 billion mining and metals powerhouse that explores for and extracts materials including copper, silver, lead, zinc, uranium, nickel and iron. This makes the company more insulated than specialty miners limited to only one or two types of ore. Deep pockets and global operations bring more certainty to BBL in the long run. While prices change and demand is never constant, this mining giant will be a key part of the global economy for many years to come. Note this foreign stock pays dividends only twice a year and in varying amounts, but the income potential is significant.
Current yield: 5.6 percent
Air Products and Chemicals (APD)
Many investors may not think of oxygen, hydrogen, carbon dioxide or helium when they think about raw materials. But a host of industries do, including soft drink manufacturers who want bubbles in their beverages, industrial firms that need gasses for welding and even the rare and specialty gasses used by high-tech firms in lasers and microchip manufacturing. Storing and distributing these gases is not a business that easily lends itself to start-ups or intense competition. With 16,000 employees and locations around the globe, APD has the scale and the infrastructure to ensure it will long be serving its customers and shareholders eager for the dividend.
Current yield: 2.8 percent
Nutrien Ltd. (NTR)
Agricultural giant Nutrien produces crop nutrients around the world, including potash, nitrogen, phosphate and ammonium sulfate, as well as seeds and pesticides. With more than 1,700 retail locations and a market capitalization of more than $30 billion, NTR is one of the world’s most connected agricultural stocks. While there has been a rise in interest around organics and other more sustainable crops, feeding a global growing population in an affordable way remains a tremendous concern — and Nutrien is a reliable piece of that puzzle, and a reliable dividend payer as a result.
Current yield: 3.3 percent
Alliance Resource Partners (ARLP)
Oklahoma-based ARLP is one of the few remaining public companies that produces and markets coal products to utilities and industries in the United States. While the use of coal for power generation is in decline, Alliance is heavily involved in metallurgical “coking” coal that is used in furnaces as a key part of steelmaking. In other words, while Alliance Resource Partners has seen a deserved decline from prior highs in 2014, don’t think this is a one-trick pony doomed for failure as the world moves toward cleaner energy. Metallurgical coal is a necessary part of turning iron into steel, and steel remains the lifeblood of many industrial industries.
Current yield: 10.9 percent
International Flavors & Fragrances (IFF)
A materials investor may overlook the sensory products created by IFF that give your shampoo its floral scent or products that give frozen yogurt a rich and creamy texture. These flavors and fragrances may not be as tangible as metal or wood but are no less important to many of the products consumers know and love to buy. From perfumes to toiletries and household cleaners, the list of applications for IFF chemicals goes on and on. That means a diverse line of customers that can support reliable revenue regardless of macroeconomic trends.
Current yield: 2.1 percent
Braskem (BAK)
Brazil’s Braskem produces and sells thermoplastic resins. While that definition is a bit abstract and high tech, in plain English that means this chemicals company makes plastics used in a variety of products, such as packaging, pipes, flooring and clothes. As these products are petroleum based, BAK also has a business line that provides gasoline, diesel and liquefied petroleum gas to end-users. This adds up to a well-rounded operation for this emerging markets company, and key relationships with high-potential businesses in Latin America because of its geographic location.
Current yield: 4 percent
Celanese Corp. (CE)
Celanese is a polymer company that produces a wide array of products that includes preservatives, sweeteners, colorants and adhesives. Its customers span a host of industries, from health care and industrial to candy makers. All this ensures that CE is not reliant on any one product or industry to make ends meet. In 2018, Celanese celebrated its 100th year of operations — and with dividends that have soared from just 4 cents quarterly in 2009 to 54 cents at present, the company has a long track record of prioritizing dividend payments to investors.
Current yield: 2.3 percent
Great raw materials stocks to buy for dividends.
Here are nine raw materials stocks that dividend investors should consider:
— CF Industries Holdings (CF)
— RPM International (RPM)
— BHP Group (BBL)
— Air Products and Chemicals (APD)
— Nutrien Ltd. (NTR)
— Alliance Resource Partners (ARLP)
— International Flavors & Fragrances (IFF)
— Braskem (BAK)
— Celanese Corp. (CE)
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9 Great Raw Materials Stocks to Buy for Income originally appeared on usnews.com
