The typical stock in the S&P 500 index (.SPX) yields about 1.8% at present. However, in the materials sector, it is common to find stocks that offer dividends that pay at two times that rate or better. That's because extracting minerals and metals from the ground is pretty steady work. There are a few smaller and more specialized miners on Wall Street, but the biggest commodity stocks have extensive operations over massive proven reserves of iron, aluminum or copper. It's just a matter of bringing that metal to market and passing a piece on to shareholders. If you're looking for a reliable payday, then check out these seven big-time materials stocks with big-time dividends.
When it comes to basic materials, it's hard to find a more entrenched stock than mining and metals giant BHP (BHP). This $130 billion global outfit has exposure to copper, iron, uranium, zinc, silver, gold and just about any other element you can think of. There is some measure of pricing risk based on the materials that BHP brings to the market, but the scale and diversified mining operations allow it to keep pumping out reliable dividends to shareholders.
Current yield: 5.2%
Rio Tinto Group
Another mining behemoth for income investors to consider is Rio Tinto (RIO), a London-based metals firm that also boasts global operations across a host of raw materials. Some of its products include iron ore, diamonds, gold and aluminum. In addition to the income potential it offers, RIO has been surging since shares crashed in 2015 based on operational challenges and persistently low commodity prices. The stock has doubled since then in addition to paying out consistent dividends.
Current yield: 5.7%
Southern Copper Corp.
As the name implies, Southern Copper (SCCO) is a copper mining and refining firm located mainly in the Southern Hemisphere. Though not as diversified as the prior two picks, SCCO is still very entrenched in its corner of the metals market with a massive $30 billion market capitalization despite its more focused operations. And it's worth noting that copper is a very versatile metal, with operations in electronics, plumbing, cookware and many other applications. So while SCCO may seem focused largely on one material, that material has a variety of uses that leads to broad and reliable demand.
Current yield: 4.2%
Ternium (TX) is another focused mining stock. It creates a variety of steel and iron products primarily through its operations in South America. Its offerings include steel reinforcing bars and tubes for construction, preengineered metal building systems, and raw iron ore and pellets for third parties. Though not glamorous, steel and iron are the lifeblood of most construction activity worldwide. That means TX is uniquely positioned as one of the largest steel players in the world and can tap into consistent sales to fuel its generous annual dividend payment.
Current yield: 5.3%
Though many of the other stocks you'll see on this list deal in metals, Compass Minerals (CMP) is different in that it focuses on salts and agricultural products instead. These include sodium chloride and magnesium chloride, which are used in a variety of ways ranging from food service to road de-icing applications. CMP also does a decent business in specialty agricultural nutrients and supplements. Investors probably don’t think much about salt as a raw material. But when you look below the surface, it becomes clear that salts are used in a wide array of necessary products and applications. That adds up to a steady flow of cash to CMP, and in turn to its shareholders via dividends.
Current yield: 4.9%
Materials giant Vale (VALE) is another steel and iron player. But Vale is slightly more diversified with metals operations that also reach out into thermal coal, gold, silver, cobalt and nickel. That's because its Brazil-based operations are large enough to tap into these other products in the course of bringing iron ore out of the ground. As a $65 billion materials stock, its byproducts and ancillary businesses add up in a hurry. This includes the other ores recovered during normal mining operations as well as ports, a fleet of some 14,000 freight cars and even a stake in local railways. Together, these operations help increase profit margins and add certainty to Vale's dividend payouts.
Current yield: 5.8%
Sociedad Quimica y Minera de Chile
Colloquially known as SQM (SQM), this company produces potassium and agricultural chemicals along with lithium used in high-tech batteries. This is a great one-two punch since it gives SQM shareholders a stake in a very stable agricultural customer base along with a higher-growth market in mobile electronics and electric vehicles. The Chilean company may not be easy for most American investors to pronounce, but the consistent and generous dividends are something that everyone can easily understand.
Current yield: 3.5%
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