Three Commodities Dividend Lovers Must Own

Over the years, value investing has emerged as one of the favorite strategies for a number of individuals and advisors. A steady stream of income that dividends provide can help protect a portfolio from market dips as well as adding an inflation hedge. The methodology has become so popular that some investors swear by it and are uneasy about making allocations to anything that lacks an important dividend yield. Many feel that value principles conflict with the commodity space; when someone thinks of commodity investing, they typically think of active trading of futures contracts or exchange traded products. But there are a number of securities that may be overlooked [see also Dividend Special: Top Companies In Every Major Commodity Sector].

With commodities playing a small, but pivotal role in a diversified portfolio, value investors have only one reason for not adding exposure; troubles finding commodity investments that pay dividends. Below, we outline three commodities whose underlying investment vehicles often offer strong dividend yields to maintain the steady income stream that your portfolio relies on [see also Dividend Special: Four Commodity Stocks Yielding Over 5%].


Coal is one of the most important energy sources in today’s world. It is primarily used as energy for power plants the world over, helping to generate roughly 40% of the world’s electricity. Although concerns remain over its relatively ‘dirty’ nature when compared to other fuel sources, the fact remains that coal is by far one of the cheapest and most abundant sources of fuel in the world today. China is by far the largest producer in the world, with the U.S. coming in second, followed by Australia. As far as value options are concerned, there are two stocks that stand out from the rest [see also Ultimate Guide To Coal Investing].

  • Arch Coal Inc. (ACI): Stationed in St Louis, this company engages in the production and sale of coal through out the US. The stock features a market cap of $3.4 billion, giving it a nice size to go along with its robust daily volume of nearly seven million. ACI pays out a healthy dividend yield of 2.7%, but be aware that the stock has been under a fair amount of pressure over the last few months.
  • Yanzhou Coal Mining Company (YZC): Yanzhou is stationed in China and focuses on the mining and production of coal through out China, Australia, Japan, and South Korea. Though not as liquid as ACI, this firm has a market cap of $12 billion, making it a potentially safer play. YZC has a current dividend payout of 3.4% [see also 25 Ways To Invest In Alternative Energy].


Copper, one of the oldest commodities, is among the most widely-used industrial metals in the world. The reddish-brown commodity is best known for its excellent conductivity for electrical wiring and also its prominence in plumbing. But aside from its main uses, copper is also used in power generation and transmission, heating and cooling systems, telecommunications equipment, motors, brakes, and a number of other everyday products. As such, many feel that a play on copper can also be thought of as a play on the overall economy, or at least on the industrial sector. When it comes to yields, there are a few copper stocks that deserve a closer look [see also 13 Ways To Invest In Copper].

  • Southern Copper Corp. (SCCO): Southern Copper is one of the biggest miners in the industry, as the stock has a current market cap of about $26 billion. Stationed in Phoenix, SCCO is in the business of mining, smelting, and refining of copper in Peru, Mexico, and Chile. Though its dividend yield fluctuates often (usually between 8%-10%) its mouth-watering yield of 9.1% is hard to overlook.
  • Freeport-McMoRan Copper & Gold Inc. (FCX): Freeport also calls Phoenix home, though its reach is more global; the company does business in regions like North and South America, Indonesia, and the Democratic Republic of Congo. Note that gold production does account for about 27% of overall business, so it is not a pure copper play. FCX, which has a market cap of $37.5 billion and an ADV topping 24 million, has a current dividend yield of 2.5% [see also Ultimate Guide To Copper Investing].

Crude Oil

Crude oil has been one of the most talked about commodities as of late, with its price breaking through the triple digit barrier for the first time in months. Though it still remains volatile, with tensions rising in the Middle East, it looks like crude oil may be set to rise for the near-term future. From an investing standpoint, there may not be a more important commodity than crude. It touches just about every part of our everyday lives, as it is used in everything from gasoline and plastics, to cosmetics and industrial solvents. Crude has cast something of an invisible net over markets as many do not realize just how often we rely on the fossil fuel in our daily routine. The dividend options for this sector are numerous, but we chose three of the most prominent options [see also Crude Oil On Fire: Examining The Commodity’s Rise].

  • Transocean Ltd. (RIG): Though the company is probably still known for the Deepwater Horizon Gulf spill early last year, it has a massive upside potential for value investors. Transocean specializes in offshore drilling activities that are often difficult to reach or in harsh environments. With a number of reserves sitting at the bottom of bodies of water, RIG may have a strong future ahead. The stock (whose yield fluctuates often) is currently paying out 7.4%.
  • British Petroleum PLC (BP): Another big name in last year’s spill, BP has been hard at work to restore their image. Though their stock price has not recovered to its pre-spill levels, it has certainly made some strides. Based in the U.K., BP has operations all around the world. The stock, which has a staggering market cap of over $137 billion, pays out a current yield of 3.9% [see also 25 Ways To Invest In Natural Gas].
  • Kinder Morgan Energy Partners LP (KMP): This MLP is an investor favorite for its consistency and powerful name. The company operates roughly 8,400 miles of oil and gas pipelines through out the U.S. and is headquartered in Houston. KMP pays out a current yield of 5.9%, but be advised, MLPs can have some unfavorable tax treatment come April. If you are looking to avoid the headache, an ETP like AMJ might be your best bet (its yield is currently around 5.3%).

[For more commodity ideas sign up for our free CommodityHQ newsletter]

Disclosure: Jared is long BP.

This entry was posted in Brent Oil, Coal, Copper, Energy, Exclusive 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.

7 Responses to “Three Commodities Dividend Lovers Must Own”

  1. [...] Today saw markets teeter back and forth as they tried to forget the news that Standard and Poor’s put all 17 euro-zone nations on credit watch. Markets were able to come away with meager gains as the S&P jumped 0.11% and the Dow gained 52 points. Gold saw another down day as the precious metal lost $1.4/oz. Gold has been experiencing a lackluster performance as of late due to all of the worries in Europe and an overall lack of investor confidence. Though the metal has had a terrific 2011 overall, the last few months have been tough on gold as it has had its fair share of trouble gaining momentum [see also Three Commodities Dividend Lovers Must Own]. [...]

  2. [...] Another area of increased interest is emerging markets; despite some recent struggles, many U.S.-based investors have begun to shed their home country bias and accept that more meaningful allocations to developing economies are necessary for achieving long-term asset growth. With developing economies in North America and Europe bogged down by hefty debt burdens, slow growth, and elevated unemployment, the “growth gap” relative to emerging markets has never seemed greater. Looking out over the next few decades, the disconnect in economic potential is significant–a realization that has prompted larger allocations to developing economies in some long-term portfolios [see also Three Commodities Dividend Lovers Must Own]. [...]

  3. [...] A further area &#959f increased interest &#1110&#1109 emerging markets; despite &#1109&#959m&#1077 recent struggles, many U.S.-based investors h&#1072&#957&#1077 begun t&#959 shed th&#1077&#1110r home country bias &#1072n&#1281 accept th&#1072t more meaningful allocations t&#959 developing economies &#1072r&#1077 n&#1077&#1089&#1077&#1109&#1109&#1072r&#1091 f&#959r achieving long-term asset growth. W&#1110th developing economies &#1110n North America &#1072n&#1281 Europe bogged down b&#1091 hefty debt burdens, &#1109&#406&#959w growth, &#1072n&#1281 elevated unemployment, th&#1077 “growth gap” relative t&#959 emerging markets h&#1072&#1109 never seemed greater. Looking out over th&#1077 next few decades, th&#1077 disconnect &#1110n economic potential &#1110&#1109 significant–a realization th&#1072t h&#1072&#1109 prompted &#406&#1072r&#609&#1077r allocations t&#959 developing economies &#1110n &#1109&#959m&#1077 long-term portfolios [see &#1072&#406&#1109&#959 Three Commodities Dividend Lovers M&#965&#1109t Own]. [...]

  4. [...] Another big category that will destroy value will be industrial metals. A euro collapse will send the world back into another tailspin, similar to 2008. With that will come a supreme weakness in the construction industry and the inevitable crash of its underlying metals, like copper, aluminum, steel, and others. The following charts shows how the copper ETN fared during the 2008 crash, as copper prices bottomed out [see also Three Commodities Dividend Lovers Must Own]. [...]

  5. [...] Coal, Coal, Coal: Throughout multiple panels, we heard various experts weigh in why they liked coal. Denis Gartman was one of the first to point out that coal’s use has been so low given depressed natural gas prices, but as NG continues to rise, he feels that coal presents an enticing long position. He was followed by a number of different industry experts who cited similar reasoning for the benefits of coal, with some adding in that should Romney win the election, coal use will see a nice boost and could be a good play for 2013 [see also Three Commodities Dividend Lovers Must Own]. [...]

  6. [...] Three Commodities Dividend Lovers Must Own [...]

Leave a Reply

  • Subscribe

    • RSS Icon   Twitter Icon
    • Sign up for free today:
  • Search