One downside to investing in commodities like gold, copper or oil directly through futures or options is that they don’t pay dividends. To earn money, the price of the commodity has to go your way.
With some stocks of companies that produce commodities, however, you can earn money if the stock price rises as well as receive a steady stream of income through dividends.
These payouts can help cushion your portfolio in a general bear market, or even if the markets for the commodities these companies produce is in a slump.
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Still, both commodities and the stocks of the companies that produce them can be quite volatile. Plus, companies have risks that direct-commodity investing doesn’t: management can make bad decisions, a project might end up costing more than expected or a crucial permit might not come through.
Rising interest rates can also affect commodity companies by increasing the cost of borrowing required for long-term, expensive project development that won’t pay off for many years, he says.
On the flip side, if rising interest rates are the result of monetary policy aiming to rein in inflation accompanying a booming economy, the extra economic demand could be an indicator of increased demand for the commodities a company produces. In that sense, commodities producers can act as a hedge against inflation.
There are a wide variety of commodities and companies that produce them, with each market having its own supply and demand nuances. Here’s a look at seven commodities companies on that spectrum that pay solid dividends:
| Stock | Forward Dividend Yield* |
| Chevron Corp. (ticker: CVX) | 4.9% |
| Exxon Mobil Corp. (XOM) | 3.8% |
| Flex LNG Ltd. (FLNG) | 12.4% |
| Torm PLC (TRMD) | 9.3% |
| Rio Tinto PLC (RIO) | 7.6% |
| BHP Group Ltd. (BHP) | 4.0% |
| Enbridge Inc. (ENB) | 5.8% |
*As of June 5 close.
Chevron Corp. (CVX)
In recent years, investors have demanded that oil and gas companies start leaning more toward dividends and share buybacks as ways of returning capital to shareholders, instead of just plowing cash back into production during boom times, potentially leading to a drop in oil and gas prices.
Chevron is one of the biggest oil and gas producers in the world and has other business lines including refining and marketing.
These diverse businesses, coupled with a global exploration and production portfolio, create a commodities company that can weather the ups and downs of the oil and gas market.
The company yields 5% and, according to Dividend.com, has increased its dividend for 38 consecutive years.
Exxon Mobil Corp. (XOM)
This oil and gas supermajor has a similar story for dividend investors as Chevron.
It’s vertically integrated and has a global footprint, giving the company stability to keep paying a dividend when others might have to curtail theirs. Exxon famously increased its dividend during the pandemic when other companies were cutting their payouts.
Cash flow is a key metric to consider when looking at companies that pay dividends. In the first quarter of this year, Exxon boasted $8.8 billion in free cash flow, supporting $4.3 billion in dividends and $4.8 billion in share repurchases.
The company yields 3.8% and has increased its dividend for 42 consecutive years.
Flex LNG Ltd. (FLNG)
Sticking with the energy theme, Flex is involved with shipping natural gas in super-chilled liquefied form.
Liquefied natural gas, or LNG, is a growing market, especially with exports from the U.S. Because of fracking and horizontal drilling, the U.S. is the biggest natural gas producer and a powerhouse exporter, whereas it once was a net importer.
Because gas can be produced cheaply in the U.S., it is economical to build massive liquefaction plants to chill the fuel and then ship it to destinations around the world, such as Europe and Asia.
“I remain bullish on shipping liquid natural gas,” says Vince Stanzione, CEO of First Information, a publisher of educational materials related to financial spread betting and derivatives trading. “You’re not at the mercy of the commodity price, and you have potential share price appreciation, and you get paid the dividend whilst waiting.”
He points out that the company has more than $400 million in cash and no debt due until 2028.
“Earnings are at a little light; however, the dividend is being held at 75 cents a quarter, so you’re being paid to wait,” he says.
While the company isn’t increasing its payout, it yields 12.4%.
[SEE: 9 Highest Dividend-Paying Stocks in the S&P 500]
Torm PLC (TRMD)
Similarly to Flex LNG, Stanzione also likes this shipping company that transports commodities. Torm’s tanker cargoes include petroleum products like gasoline, jet fuel, naptha and diesel. Torm’s fleet consists of about 90 vessels and is involved in shipping worldwide.
Although electric vehicles are making inroads, demand hasn’t been as robust as once expected. Experts expect gasoline- and diesel-powered vehicle sales to continue for some time.
The company has a low price-to-earnings ratio of 7.6 and a 9.3% dividend.
Rio Tinto PLC (RIO)
Turning to mining, this global, diversified company is a top commodities dividend payer.
“Rio’s dividend is consistently one of the strongest in the sector, and they’ve made it a point to return capital even when markets get choppy,” says Nicolas Lin, interim CEO of equity trading platform company Aether Holdings and partner at 28 Ventures, a venture capital firm.
“They’ve also been proactive about shifting into energy transition metals, which I think positions them well for the next decade,” he says.
While the company is a major iron ore player, Lin likes that Rio has been expanding into copper and lithium, both of which are crucial to electrification, infrastructure and energy security.
Rio yields 7.6%.
BHP Group Ltd. (BHP)
This global mining giant offers a similar investing case as Rio Tinto.
Amid the global energy transition away from fossil fuels for electricity production, BHP has been exiting thermal coal, which is used to generate electricity and is a major source of planet-warming gas.
BHP has been investing more in copper, a key metal to the energy transition because it is used for wiring in renewable energy installations and in bulking up the grid, as well as in electric vehicles.
Meanwhile, BHP has also been investing in mining potash, a key fertilizer ingredient that will become even more important as the global population continues to grow.
“They’re thinking ahead, and that shows in how they manage their balance sheet and dividend policy,” Lin says.
Although interest rates are higher than they have been in some time, giving investors more income options, Lin says “not all yield is created equal.”
He says durability is what sets the dividends of Rio and BHP apart.
“Rio and BHP are capital disciplined, with strong commodity exposure and the flexibility to pull back or push forward depending on the cycle,” he says. “They’re not overextending to pay these dividends.”
BHP yields 4%.
Enbridge Inc. (ENB)
This energy transportation company’s dividend is also durable, as it is backed by long-term contracts that include inflation protection, says Lin.
“Enbridge is a cash flow machine,” he says. “It’s one of the few names in the commodity space where the income feels utility-like in its reliability.”
The company transports and distributes oil, natural gas and natural gas liquids through a network of pipelines.
“For Enbridge, their revenues are largely insulated from commodity volatility, and the inflation-linked nature of many of their contracts makes the dividend even more appealing as a long-term income stream,” Lin says.
Enbridge yields 5.8% and, according to Dividend.com, has increased its dividend for two consecutive years.
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7 Commodity Stocks to Buy for Solid Dividends originally appeared on usnews.com
Update 06/06/25: This story was previously published at an earlier date and has been updated with new information.
