Commodity Stock Plays in the 2012 Dividend Achievers

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 dividend news subscribe to our free newsletter].

Dividend Achievers

The dividend achievers are a select group of stocks that have raised their dividend yield for the last 10 consecutive years. Note that there is also a “dividend aristocrats” index which includes companies who have raised dividends for 25 years in a row. A consistently rising dividend rate is typically a sign of a healthy company, as it shows that their business is still going strong and that they can afford to increase payouts. Many investors also see hefty dividend payouts as a cue that the company is relatively strong being that a cash distribution to investors cannot be faked by cooking the books or other crafty techniques that accountants can use.

After exploring the full 2012 list of achievers, we found five 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].

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.

Quick Stats (as of 7/20/2012)

  • P/E Ratio: 7.9
  • Dividend Yield: 3.31%
  • Payout Ratio: 23%
  • Last Dividend Payout: 6/10/2012

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 [see also 25 Ways To Invest In Crude Oil].

Quick Stats (as of 7/20/2012)

  • P/E Ratio: 6.1
  • Dividend Yield: 4.68%
  • Payout Ratio: 29%
  • Last Dividend Payout: 6/1/2012

Monsanto Co (MON)

Monsanto is a coveted agriculture stock as it is a dominant name in the industry. MON is the world’s leading producer of herbicide glyphosate and is the second biggest producer of genetically engineered seeds. Note that as an agricultural chemicals stock, MON will be a rather indirect play on the commodity industry, though it will still offer nice exposure for your portfolio. The stock boasts a market cap of over $45 billion and a healthy EPS of 4. Its current dividend payout is 1.4%, making it one of the smaller distributors on this list.

Quick Stats (as of 7/20/2012)

  • P/E Ratio: 21.8
  • Dividend Yield: 1.38%
  • Payout Ratio: 29%
  • Last Dividend Payout: 7/26/2012

Buckeye Partners LP (BPL)

This MLP is based in Houston and owns/operates pipelines for refined petroleum products all throughout the US. The company falls on the smaller end of this list, with a market cap of $5.3 billion and trading 415,000 times each day. BPL has lost 10% in the trailing year but has begun to turn around in the last few weeks as oil prices have clawed their way back. The best part about this stock? It follows suit with other MLPs and pays out a massive 7.7% in dividends [see also 25 Ways To Invest In Natural Gas].

Quick Stats (as of 7/20/2012)

  • P/E Ratio: 54.0
  • Dividend Yield: 7.69%
  • Payout Ratio: 400%
  • Last Dividend Payout: 5/31/2012

TC Pipelines LP (TCP)

Those looking for a small cap play may want to give TCP a closer look, as it has a market cap of just $2.4 billion. Based in Omaha, the company  transports natural gas to market hubs and consuming markets primarily in the western and midwestern United States, and central Canada. TCP’s performance has been all over the board in the past few years. For 2009 and 2010 respectively, the stock shot up 70.8% and 49.13%, but 2011 saw it dip by about 3%. The stock is down a bit on the year, but seems to have recovered nicely from the hit the market took in 2008. TCP’s current payout amounts to a healthy 6.7%, making it a perfect addition for those searching for a hefty income stream.

Quick Stats (as of 7/19/2012)

  • P/E Ratio: 16.0
  • Dividend Yield: 6.7%
  • Payout Ratio: 108%
  • Last Dividend Payout: 5/14/2012

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Disclosure: No positions at time of writing.

This entry was posted in Actionable Ideas, Agriculture, Asset Allocation, Brent Oil, Commodity Producers, 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.

4 Responses to “Commodity Stock Plays in the 2012 Dividend Achievers”

  1. [...] The United States Natural Gas Fund (UNG) was one of the weakest performers, shedding 3.15% on the day. After a wildly successful few days of trading, this ETF cooled off its winning streak ahead of tomorrow’s inventory reports as profit taking pressures prompted investors to lock in gains. UNG gapped slightly lower at the open, only to tumble lower during mid-morning trading hours [see also Commodity Stock Plays in the 2012 Dividend Achievers]. [...]

  2. [...] Russia boasts an impressively low 9.6% debt-to-GDP ratio, trailing only behind Saudi Arabia and Estonia for which there are currently no ETFs available. This energy-centric economy has yet to fall prey to an uncontrollable credit boom, making a standout in a region otherwise characterized by towering debts. RSXJ’s portfolio of predominantly mid and small cap size securities may offer a better play on the local economy compared to its large-cap counterpart RSX, which is dominated by multinational energy and financial firms [see also Commodity Plays In The 2012 Dividend Achievers]. [...]

  3. [...] Equity markets endured another turbulent trading week as lackluster earnings reports at home along with looming debt drama in the overseas currency bloc continue to plague investors’ confidence. Economic data releases remain mixed on Wall Street, further adding to the growing clouds of uncertainty; new home sales and pending home sales data both missed the mark, while weekly jobless claims helped bring back the bulls and recover a chunk of the losses lost earlier in the week for major indexes. AdvisorShares announced it will be shuttering the doors on the DENT Tactical Advantage ETF (DENT) on August 8, while Vanguard and First Trust both filed for fixed income focused ETFs [see also Commodity Stocks Plays In The 2012 Dividend Achievers]. [...]

  4. [...] lower than some of the other picks, this limited partnership presents a stable investment with a sustainable yield. Look for risk elsewhere, as the major advantage of MLPs is the dividend yield, which needs to be [...]

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