Commodity Stock Plays in the 2012 Dogs of the S&P

Many investors are familiar with a group known as the “Dogs of the Dow”, or the 10 highest yielding stocks at the end of the prior year. Many investors use this strategy to help pick securities for the coming year, as they will not only offer strong dividend yields, but it may also be that their prices have been beaten down. Dividend yields and stock prices have an inverse relationship, meaning that a higher yield could reflect a poor performance from a stock in the prior year. Many feel that the dogs are oversold and the fact that they are still offering high dividend yields means the company is still strong [see also 12 High-Yielding Commodities For 2012].

Though many argue of whether or not this strategy is worth its salt, many are unaware that there is a relatively new category called the “Dogs of the S&P 500″. The concept is the very same as the Dow version, only there are a lot more companies to choose from and hence a much bigger list when all is said and done. After taking a look through 2012′s dogs, we identified six commodity stocks that deserve a closer look for your portfolio.

Chevron Corporation (CVX)

As one of the largest oil producers in the U.S., CVX may already have a place in your portfolio. The stock has a hefty market cap of $213 billion and trades nearly 7 million times per day. The company is split into two segments of operation: upstream and downstream. The upstream portion focuses on the discovery and extraction of crude oil and natural gas while the downstream segment refines and markets the fossil fuels. It should be noted that CVX’s current P/E ratio of just 7.9 leaves it undervalued by the standards of many investors, making it a good time to buy for those who fall under that camp. Last but certainly not least, CVX has a current dividend yield of 3.3% for its shareholders [see also 25 Ways To Invest In Crude Oil].

Quick Stats (as of 7/23/2012)

  • P/E Ratio: 7.9
  • Dividend Yield: 3.30%
  • Payout Ratio: 23%
  • Last Dividend Payout: 6/11/2012

ConocoPhillips (COP)

Another domestic oil and gas producer, Conoco comes in as the second company on this list, sporting a market cap of just over $70 billion. Its key stats are relatively similar to that of CVX in that it has a low P/E of 6.1 and trades 11 million times each day. As of the end of 2011, COP had operations in 19 countries around the world with proven reserves in 15 of those nations. COP sets itself apart from Chevron with its juicy dividend yield of 4.7%, helping to sway investors who may have been on the fence with these two firms.

Quick Stats (as of 7/23/2012)

  • P/E Ratio: 6.0
  • Dividend Yield: 4.72%
  • Payout Ratio: 29%
  • Last Dividend Payout: 6/1/2012

E. I. du Pont de Nemours and Company (DD)

As a conglomerate or sorts, this will definitely be the least direct commodity play on this list, but some investors may prefer a more diverse nature to a singular ticker. With a market cap of $45 billion and an average daily volume of nearly 5 million, DD comes in as a trader’s delight as it offers supreme liquidity for quick movement of positions. The commodity aspect of DD comes from their agriculture segment which produces herbicides, fungicides, and insecticides under the brand name Pioneer. This stock’s underlying financials look relatively strong save for the fact that its overall performance racked up losses of just over 10% in the trailing year. Finally, DD maintains a lucrative dividend yield of 3.5% [see also Four Commodities To Buy Before Roubini’s “Perfect Storm”].

Quick Stats (as of 7/23/2012)

  • P/E Ratio: 12.9
  • Dividend Yield: 3.52%
  • Payout Ratio: 44%
  • Last Dividend Payout: 6/12/2012

Spectra Energy (SE)

Spectra engages in the ownership and operation of a portfolio of natural gas-related energy assets in North America. Overall, the Houston-based firm has over 39,000 miles of pipeline and has storage capacity around 155 billion cubic feet (bcf) of the fossil fuel. Reporting earnings in a week, SE will be a big stock to watch, as natural gas has had a stellar couple of months, which may help boost profits and overall revenues. SE pays out a dividend of 3.7% to its shareholders.

Quick Stats (as of 7/23/2012)

  • P/E Ratio: 16.9
  • Dividend Yield: 3.68%
  • Payout Ratio: 62%
  • Last Dividend Payout: 6/11/2012

Marathon Oil Corporation (MRO)

It’s safe to say that energy companies are most certainly the trend in the dogs of the S&P this year. Marathon Oil is an oil and gas producer that is divided into three different segments: Exploration and Production, Oil Sands Mining, and Integrated Gas. The stock has a market cap of just over $18 billion and a relatively low P/E ratio of 7.81. Marathon pays out a dividend of 2.6% and will report its earnings next week, making it another one to keep an eye on [see also Jim Rogers Says: Buy Commodities Now, Or You’ll Hate Yourself Later].

Quick Stats (as of 7/23/2012)

  • P/E Ratio: 7.8
  • Dividend Yield: 2.49%
  • Payout Ratio: 22%
  • Last Dividend Payout: 6/11/2012

Nucor Corporation (NUE)

This company engages in the manufacturing and sale of steel throughout North America and the rest of the world. Nucor is divided into three distinct segments: Steel Mills, Steel Products, and Raw Materials. As a steel company, NUE will be very dependent on the surrounding economy, especially the construction industry. With that sector of the market falling on some unpredictable times, NUE’s most recent earnings came in sour and the stock took a hit. But the dip may only be temporary, allowing investors to get in while the stock is still cheap. NUE has a market cap topping $12 billion and pays out a hefty dividend yield of 3.9%.

Quick Stats (as of 7/23/2012)

  • P/E Ratio: 20.9
  • Dividend Yield: 3.85%
  • Payout Ratio: 81%
  • Last Dividend Payout: 5/11/2012

Don’t forget to subscribe to our free daily commodity investing newsletter and follow us on Twitter @CommodityHQ.

Disclosure: No positions at time of writing.

This entry was posted in Brent Oil, Commodity Futures, Dividends, Energy, Natural Gas, WTI and tagged , , , , , . Bookmark the permalink.

Commodity HQ is not an investment advisor, and any content published by Commodity HQ does not constitute individual investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities or investment assets. Read the full disclaimer here.

Related News Stories