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.

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