In this article we present the list of 11 Best Materials Dividend Stocks To Buy Now. Click to skip ahead and see the 5 Best Materials Dividend Stocks To Buy Now.
Materials stocks cover a wide range of companies that do everything from the mining of gold, iron ore, and other precious metals, to the manufacturing of fertilizers, plastics, and other components. Materials companies, which tend to be highly cyclical in nature, have enjoyed a banner run in recent years as demand for metals, fertilizers, and plastics has grown.
The iShares U.S. Basic Materials ETF, which contains 39 holdings from the basic materials sector, gained 19.2% in 2019, followed by 17.8% and 25.6% gains in 2020 and 2021 respectively. Another major materials ETF is the Materials Select Sector SPDR Fund (NYSEARCA:XLB), which tracks the materials companies in the S&P 500. That ETF gained 81% between 2019 and 2021 as the performance of materials companies improved across the board.
Their strong performance has allowed many top materials dividend stocks to greatly boost their payouts in recent years, such as Southern Copper Corporation (NYSE:SCCO), which more than doubled its dividend payments between 2020 and 2021.
With a recession now looming and demand in some segments of the materials sector tapering off again, materials stocks have struggled this year, with the Materials Select Sector SPDR Fund losing close to 10% of its value and the iShares U.S. Basic Materials ETF performing even worse.
That’s created an interesting inflection point for dividend investors, as many of these companies have maintained their dividends or made only slight cuts to them in recent quarters as their earnings have fallen, but have seen their yields rise in response to falling share prices. More importantly, investor concerns about their near-term performance or the safety of their dividends may be overblown, particularly when it comes to mining stocks.
In the middle of October, Barron’s writer Andrew Bary noted that investors appear to be avoiding mining stocks unnecessarily, given that many of the best high yield materials stocks have very strong balance sheets, are still pulling in solid earnings, and have strong dividends. Bary specifically mentioned a few of the diversified miners featured in this list, including Newmont Corporation (NYSE:NEM), Barrick Gold Corporation (NYSE:GOLD), and Rio Tinto Group (NYSE:RIO) as having favorable setups.
When demand rebounds and commodity prices rise again, which is expected to happen in many segments of the industry by next year, shares have the potential to rebound to 2021 levels, while dividend payments could be pushed higher than ever, ranking materials companies among the most compelling dividend stocks on the market right now.
With that in mind, let’s take a look at the 11 best materials dividend stocks to buy now, many of which have greatly raised their payouts over the last two years.
Photo by Francisco Fernandes on Unsplash
The following materials dividend stocks are ranked based on hedge fund sentiment. We follow a select group of hedge funds because Insider Monkey’s research has uncovered that their consensus stock picks can deliver outstanding returns.
All hedge fund data is based on the exclusive group of 900+ funds tracked by Insider Monkey that filed 13Fs for the Q2 2022 reporting period.
11 Best Materials Dividend Stocks To Buy Now
11. POSCO (NYSE:PKX)
Number of Hedge Fund Shareholders: 8
Dividend Yield: 1.36%
Barrick Gold Corporation (NYSE:GOLD), Newmont Corporation (NYSE:NEM), and Dow Inc. (NYSE:DOW) are some of the best materials dividend stocks to buy now. Another materials company worth looking into is Korean steelmaker POSCO (NYSE:PKX), which pays out a variable dividend quarterly.
POSCO (NYSE:PKX)’s trailing 12-month dividend payouts have more than doubled since the end of 2020 despite the company skipping a quarterly payment in Q1 of this year, during which it split off its steel operations and transitioned into a holding company. POSCO pays out 30% of its net income as dividends to shareholders, which amounted to $0.7976 and $0.7382 payments during Q2 and Q3 respectively. The company’s Q3 operating profit did slump by 71% year-over-year as global steel demand weakens.
Hedge fund ownership of POSCO (NYSE:PKX) has fallen by 41% in 2022 among the select group of funds tracked by Insider Monkey’s database, hitting an all-time low in the process. Furthermore, the company’s largest shareholder as of June 30, Richard S. Pzena’s Pzena Investment Management, unloaded 92% of its PKX stake in Q3, leaving it with 84,898 shares.
10. Southern Copper Corporation (NYSE:SCCO)
Number of Hedge Fund Shareholders: 17
Dividend Yield: 3.31%
Southern Copper Corporation (NYSE:SCCO)’s dividend payments more than doubled in 2021 to $3.20 from $1.50 a year earlier, and got off to a strong start in the first half of this year, with two quarterly payouts totaling $2.25. The company has since pared back its payments to $1.25 in the second half of this year, including a $0.50 quarterly payment later this month, its lowest since 2020.
Southern Copper Corporation (NYSE:SCCO)’s EPS has fallen by about 20% year-over-year during each of the past two quarters as demand weakens and copper prices decline. Nonetheless, its $0.67 in Q3 EPS handily beat estimates, and analysts tend to prefer Southern Copper over its bigger rival Freeport-McMoRan Inc. (NYSE:FCX) thanks to its lower cost of production and ability to return more cash to shareholders.
Hedge fund ownership of Southern Copper Corporation (NYSE:SCCO) ticked up slightly during Q2 but has nonetheless fallen by 38% since the first quarter of 2021. Ken Fisher’s Fisher Asset Management owns a sizable SCCO stake as of June 30 consisting of 3.58 million shares, while Ken Griffin’s Citadel Investment Group added Southern Copper to its 13F portfolio during Q2, buying 422,183 shares.
9. BHP Group (NYSE:BHP)
Number of Hedge Fund Shareholders: 19
Dividend Yield: 11.2%
Global resources giant BHP Group (NYSE:BHP), which primarily mines copper, coal, and iron ore, has grown its dividend payments over each of the last two years after scaling back its payouts in 2020. Its semi-annual payments totaled $6.50 in 2022, which equates to a dividend yield of over 11%. The dividend is unlikely to remain that high for long, with the yield likely settling around the 5-6% mark in the future.
As with other mining companies, BHP Group (NYSE:BHP) has been impacted by weakening prices and demand, particularly when it comes to the company’s robust iron ore operations, which accounted for over 50% of the company’s record fiscal year 2022 EBITDA. How the Chinese economy performs in the coming quarters will be key to the company’s fortunes, as the country typically accounts for 60% or more of BHP’s revenue.
Smart money interest in BHP Group (NYSE:BHP) has remained relatively consistent over the past decade, with between 16 and 21 hedge funds being long BHP throughout the majority of that period. As with Southern Copper, Ken Fisher’s firm was the largest shareholder of BHP on June 30, while Ken Griffin’s was also buying BHP shares during Q2, raising its stake by 78% to 1.34 million.
8. Rio Tinto Group (NYSE:RIO)
Number of Hedge Fund Shareholders: 24
Dividend Yield: 10.6%
Rio Tinto Group (NYSE:RIO)’s dividend payments totaled $7.46 in 2020, down from over $9.50 in 2021, but well above the $3.86 paid out in 2020. Its dividend payments have grown at a CAGR of 23.7% over the last five years.
A diversified global mining company, Rio Tinto Group (NYSE:RIO) gives investors exposure to a wide range of minerals, metals, and gems like diamonds, aluminum, lithium, gold, and copper. Rio Tinto’s financial results fell across the board during the June quarter, with revenue declining by 10% year-over-year to $14.9 billion, while diluted EPS took a 27.8% hit to $2.73. In a research note to investors, Jefferies stated that the company’s earnings and cash flow were likely to continue trending down in Q3 before potentially hitting a trough in Q4.
Hedge fund ownership of Rio Tinto Group (NYSE:RIO) rose for three straight quarters beginning in Q3 2021 before dipping slightly during Q2 of this year. Quant funds Arrowstreet Capital and Renaissance Technologies held two of the largest RIO positions as of June 30, owning 10 million and 1.35 million shares respectively.
7. International Paper Company (NYSE:IP)
Number of Hedge Fund Shareholders: 27
Dividend Yield: 5.05%
International Paper Company (NYSE:IP) cut its quarterly dividend payments by $0.05 in the final quarter of 2021, to $0.4625 per share, a payout rate that has remained in place throughout 2022. The company has a 32-year run of making dividend payments and has a stable dividend payout ratio of less than 50% supporting its payments.
International Paper Company (NYSE:IP) shares hit a 52-week low in early October, which has contributed to the packaging company’s dividend yield soaring above 5%. IP shares took a big in September in part due to a poor earnings report and forecast from FedEx Corporation (NYSE:FDX), which frightened investors away from e-commerce packaging-related companies like International Paper, which generates more than half its revenue from the sale of corrugated packaging.
There was a 29% drop in the number of funds long International Paper Company (NYSE:IP) during the first quarter of this year, dropping smart money ownership of the stock to a two-year low. Edgar Wachenheim’s Greenhaven Associates had 4.5% 13F exposure to IP as of June 30, owning 4.99 million shares worth $209 million.
6. Vale S.A. (NYSE:VALE)
Number of Hedge Fund Shareholders: 27
Dividend Yield: 9.14%
Brazilian miner Vale S.A. (NYSE:VALE) had raised its dividend in 2020 and 2021, but was forced to scale it back this year as profits decline. The company’s two semi-annual payments this year totaled $1.4115, down from over $2.50 last year. While investors appear concerned about the future of Vale’s dividend, driving VALE shares down by 25.8% since April 1 (and ironically, making the stock’s yield even more attractive), the company remains committed to paying out a healthy dividend even as it faces headwinds in its iron ore business.
Hedge fund ownership of Vale S.A. (NYSE:VALE) has remained virtually flat for four straight quarters, but remains down by 35% since early 2017. Arrowstreet Capital made a big investment in the company during Q2, raising its stake by 960% to 20.1 million shares, while Rajiv Jain’s GQG Partners hiked its own position in the company by 22% to 19.1 million shares.
GMO LLC is thrilled with the amount of money Vale S.A. (NYSE:VALE) is returning to shareholders, as revealed in its Q1 2022 investor letter:
“Let’s look at Vale (NYSE:VALE), the world’s largest iron ore producer, as a case study for how shareholders can be rewarded. Vale’s stock price is about where it was at the beginning of last year. Despite the market’s lack of enthusiasm, the company generated about $20 billion of free cash flow last year. Not bad for a company with a market cap of a little over $100 billion and no substantive debt as of the end of March. 4 What did the company do with all that cash? Last year, Vale paid out about $9 billion in regularly scheduled dividends and distributed another $10 billion between extra dividends and share repurchases. Combined with dividends distributed in the first quarter of this year and a recently announced share repurchase, Vale has returned or announced the return of over $33 billion since the beginning of last year, almost a 32% yield relative to the market cap of the company. Not a bad way to win.”
Dow Inc. (NYSE:DOW), Barrick Gold Corporation (NYSE:GOLD), and Newmont Corporation (NYSE:NEM) are some of the best materials dividend stocks to buy now. See why by clicking the link below.
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Disclosure: None. 11 Best Materials Dividend Stocks To Buy Now is originally published at Insider Monkey.