Commodity Plays in the 2012 Dividend Aristocrats

In today’s current market environment, one that is plagued with volatility and offering low rates for those trying to earn a steady income, investors have begun to widely adopt dividend strategies. Not only can dividends help keep a portfolio in line with inflation, but they also add a predictable income stream to a portfolio through cash distributions on a regular basis. But when it comes to commodity investing, dividends rarely overlap. The majority of commodity investments are made via futures contracts or other funds that invest directly in the asset itself, but there are also ways for commodity investors to gain access to their favorite tangible assets while still maintaining a strong income stream [for more on commodity dividends subscribe to our free newsletter].

Dividend Aristocrats

The “Dividend Aristocrats” is a group of 50 or so stocks listed on the S&P 500 that have increased their dividend payouts for a minimum of 25 consecutive years. “These are large, blue chip companies that have historically provided (slightly) better performance and (slightly) lower volatility than the S&P 500 as a whole” writes Forbes. The index was comprised of 42 stocks for 2011, but this year saw one company get dropped and ten new entries, bringing the total up to 51 for 2012. With strong and increasing dividend yields and impressive performances, it is no wonder that these are some of the most coveted stocks in the world.

After scouring through the full list of 2012′s aristocrats, we found three strong commodity producers that deserve a closer look when it comes time to make your hard asset allocation. While these may not be a pure play on the underlying commodities that are produced, the growing income stream and steady performance may be too enticing for investors to ignore [see also 12 High-Yielding Commodities For 2012].

Exxon Mobil (XOM)

An obvious choice and likely a holding of many commodity investors. Exxon is one of the biggest companies in the world and it has a dominant position in the oil & gas industry. The stock has a current market cap of just over $400 billion and trades just over 18 million times per day. Better yet, XOM’s current P/E ratio is sitting at just over 10, leaving it undervalued by the standards of many investors. As for dividend yields, the 2.6% payout from this stock is not the highest of the Aristocrats, but it is certainly a nice bump to your portfolio.

Quick Stats (as of 7/19/2012)

  • P/E Ratio: 10.4
  • Dividend Yield: 2.64%
  • Payout Ratio: 23%
  • Last Dividend Payout: 6/10/2012

Archer Daniels Midland Company (ADM)

Based out of Illinois, ADM procures, transports, stores, processes, and merchandises agricultural commodities and products in the United States and internationally. Along with being one of the biggest names in food production, ADM also began investing in alternative fuels as they are working to develop bioethanol and biodiesel. The stock has a market cap of just over $18 billion and has a current dividend yield of 2.5%. Keep a close eye on this stock as its last quarter’s revenue growth was -31%. ADM will report earnings next week and a bad report may afford a nice entry point to those looking to buy in on the cheap [see also Invest Like Jim Rogers With These Three Agriculture Stocks].

Quick Stats (as of 7/19/2012)

  • P/E Ratio: 13.8
  • Dividend Yield: 2.54%
  • Payout Ratio: 34%
  • Last Dividend Payout: 6/6/2012

Nucor Corporation (NUE)

This company engages in the manufacturing and sale of steel through out 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 and allow 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 3.8%.

Quick Stats (as of 7/19/2012)

  • P/E Ratio: 15.9
  • Dividend Yield: 3.77%
  • Payout Ratio: 61%
  • Last Dividend Payout: 5/11/2012

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Disclosure: No positions at time of writing.

This entry was posted in Actionable Ideas, Agriculture, Asset Allocation, Dividends, Energy, Gasoline, Industrial Metals, Natural Gas, Steel, 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.

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