Check out these materials stocks with dividends.
Materials stocks are interesting opportunities as they provide investors a chance to get in on the ground floor of products or economic trends. After all, you can’t build skyscrapers without steel and you can’t wire electronics without copper. Though these commodities can sometimes fluctuate in the short term based on pricing trends, materials stocks with diversified or larger operations often smooth out those disruptions over time. And let’s not forget that while volatility comes with risk, a small and more focused player can ride those price movements to bigger profits. If you’re interested in buying materials stocks for income, here are seven options that are worth a look in 2021.
BHP Group (ticker: BHP)
Australia’s BHP is the world’s largest mining company based on market capitalization, with operations valued at a staggering $180 billion at present. For reference, that makes it roughly the size of oil giant Chevron Corp. (CVX) or Big Pharma powerhouse Eli Lilly & Co. (LLY). There is obviously a big measure of stability that comes with a footprint like that, particularly as BHP is diversified across many mining businesses including copper, iron and coal as well as fossil fuel production. Tracing its roots back to 1851, the company and its stock have a rich history of success and a long track record of generous dividends paid twice annually.
Current yield: 3.3%
Compass Minerals International (CMP)
Perhaps the smallest and most focused player on this list, Compass Minerals is a specialty chemicals company that mainly focuses on agricultural chemicals as well as sodium chloride and magnesium chloride for industrial use. For those who remember their chemistry, those last two products are fancy names for rock salt. Many investors may not think of salt mines when they think about the materials sector, but these salts are crucial for a host of products and applications ranging from de-icing for roadways to water treatment to agricultural. At $2 billion, CMP is not as entrenched as other firms on this list — but it is the biggest fish in a small pond, and that does provide a measure of reliability as it dominates a niche segment of the materials sector and offers reliable dividend payouts of 72 cents quarterly.
Current yield: 4.6%
Nutrien is in the minerals business, providing agricultural chemicals including nitrogen, phosphates and potash to farmers looking to increase their crop yields. Thanks to strong baseline demand for these products, there is a measure of stability in Nutrien that other miners may not be able to replicate. After all, food is always in demand and farmers will always buy fertilizers regardless of broader ups and downs in the economy. NTR pays a dividend of 45 cents per quarter, which is good for an above-average yield when compared with other stocks on Wall Street right now.
Current yield: 3.4%
Rio Tinto Group (RIO)
A $135 billion materials stock, Rio Tinto is involved in industrial metals and mining. The company’s operations focus on aluminum, silver, copper, gold and iron ore, but they also reach into rare elements including molybdenum, uranium and even diamonds. Based in the U.K., Rio Tinto was founded in 1873 and has a rich history and deep relationships with end users around the globe. Its diversified operations along with its large scale helps provide a measure of certainty for dividend investors looking for outsize yield in the sector.
Current yield: 4.7%
SunCoke Energy (SXC)
Illinois-based SunCoke is an independent coal company. Though most people may think about coal as a dirty source of energy that is on the outs, SunCoke sees coal very differently thanks to the fact that its business is largely focused on “coking” coal used in steel production. Steel is simply an alloy formed from iron ore hardened with the addition of carbon — and for centuries, that carbon has come from coal. The world may be able to move away from coal as an energy source, but basic chemistry means there will be demand for coking coal as long as we have a need for steel, too. SXC is a decent way to play this trend, and it offers a 6-cent dividend that was not disrupted in 2020 despite the challenges of the pandemic.
Current yield: 4.1%
Vale S.A. (VALE)
Many income investors may not think much of Vale, as the company is headquartered in far-off Brazil and only pays its dividend once a year. If you want to play the materials sector, Vale should certainly be on your radar as it is a $90 billion mining powerhouse that produces everything from iron ore and nickel to precious metals and coal. And being a South American company, the emerging economies nearby that need these materials to continue their growth and expansion are key customers that could provide upside. With operations like these at a big scale, VALE is one of the top materials stocks on the planet.
Current yield: 2.6%
India-based Vedanta is a diversified natural resources company that produces oil and gas and mines for metals including zinc, lead, silver, copper, aluminum and iron ore. Though relatively small compared with other megaminers on this list, its proximity to faster-growing economies in Asia including India and China have provided a nice tailwind for VEDL even as Western economies have pulled back on construction or industrial activity in the last year or so amid the pandemic. Based on its two payouts in 2020, with a small dividend in March and a larger payment in October, the yield in VEDL is quite generous.
Current yield: 7.6%
Seven materials stocks to buy for income:
— BHP Group (BHP)
— Compass Minerals International (CMP)
— Nutrien (NTR)
— Rio Tinto Group (RIO)
— SunCoke Energy (SXC)
— Vale S.A. (VALE)
— Vedanta (VEDL)
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