As the years have progressed, commodity exposure has evolved from a binary factor, either you have it or you don’t, to a necessary component of every portfolio. But as markets have been continually beaten down as of late, for many investors, finding the right commodity allocation has been something of a difficult task. A number of investors have stopped looking for growth, and taken cover in value funds that pay out annual yields in a time when no returns are guaranteed [for more commodity news subscribe to our free newsletter].
Dividend payments are a crucial element to investing, as they not only provide inflation hedges and steady income, but they also point to a company that is healthy. Typically only a strong company is able to pay out cold hard cash to its investors, where as a non-dividend company has an easier time cooking its books to make everything appear business as usual. Below, we outline five of the largest commodity dividend payers in the world allowing investors to add a healthy income stream to their portfolio while maintaining critical exposure to hard assets.
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 under $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 2.7% payout from this stock is not the highest of the Aristocrats, but it is certainly a nice bump to your portfolio [see also 25 Ways To Invest In Crude Oil].
Quick Stats (as of 7/26/2012)
- P/E Ratio: 10.4
- Dividend Yield: 2.67%
- Payout Ratio: 23%
- Last Dividend Payout: 6/11/2012
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 3.4% for its shareholders.
Quick Stats (as of 7/26/2012)
- P/E Ratio: 7.9
- Dividend Yield: 3.39%
- Payout Ratio: 23%
- Last Dividend Payout: 6/11/2012
BHP Biliton (BHP)
Though a number of specific metals have their own respective sectors, when it comes to general metals mining, few companies have the clout that BHP Billiton (BHP) has amassed. The company has a massive market cap of $165 billion, making it one of the largest companies in the world. BHP is responsible for mining a vast amount of metals including copper, gold, lead, zinc, iron ore, manganese, coal, aluminum, and others. The company has headquarters in both London and Australia while paying out a dividend yield of 3.2%, creating a good large cap value play for risk-averse investors [see also Four Commodities To Buy Before Roubini’s “Perfect Storm”].
Quick Stats (as of 7/26/2012)
- P/E Ratio: 7.6
- Dividend Yield: 3.19%
- Payout Ratio: 21%
- Last Dividend Payout: 3/22/2012
British Petroleum (BP)
BP is a well-known oil and gas producer throughout the world. Unfortunately, many people still associate the company with the Deepwater Horizon Spill, the most costly of its kind in the U.S., which destroyed the stock price. Currently, the stock is still a long ways off of its pre-spill highs and is sitting at a P/E ratio of 5.2, what many would consider to be undervalued. The company has a current market cap of $125 billion and is in fact, still dealing with the massive costs of that 2010 spill. On the upside, BP’s dividend yield of 4.8% is a hard one to top, making it one of the most attractive options on this list.
Quick Stats (as of 7/26/2012)
- P/E Ratio: 5.4
- Dividend Yield: 4.81%
- Payout Ratio: 23%
- Last Dividend Payout: 6/27/2012
Rio Tinto (RIO)
Another dominant global miner, RIO has a healthy market cap of $80 billion and trades over 3.5 million times each day. RIO focuses a fair amount of its efforts on the metals industry, producing bauxite, alumina, and aluminum; copper, gold, molybdenum, silver, and nickel. The company also is a well-known name for other minerals like diamonds and salt. Founded in 1873, RIO currently operates in six different continents with a bit of a tilt towards the resource-rich Australia. The stock is currently offering a healthy dividend yield, paying out 3.4% to its shareholders [see also Doomsday Special: 7 Hard Asset Investments You Can Hold in Your Hand].
Quick Stats (as of 7/26/2012)
- P/E Ratio: 14.7
- Dividend Yield: 3.36%
- Payout Ratio: 39%
- Last Dividend Payout: 4/12/2012
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Disclosure: Jared is long BP.
[...] The United States Natural Gas Fund (UNG) was one of the best performers, gaining an incredible 5.64% on the day. As weather forecasts reported the continuation of high temperatures and dry weather, this ETF soared alongside natural gas futures today. UNG gapped significantly higher at the open, only to slide sideways throughout the day. UNG settled just below its high of $22.11 a share [see also Want Juicy Dividend Yields? Buy The Top Five Commodity Megacaps]. [...]
[...] The homefront will be flooded with economic data release today, giving investors plenty to react to and digest. As such, the State Street Consumer Discretionary Selector Sector SPDR (XLY, A+) will make its way onto our radar screen since consumer spending and consumer confidence reports will come into focus. Analyst are expecting for consumer spending to rise by 0.1% after coming in flat last month, while consumer confidence is expected to come in at 61.4 versus last month’s reading of 62 [see also Want Juicy Dividends? Buy The Top 5 Commodity Megacaps]. [...]
[...] Anadarko Petroleum counts on domestic natural gas for around half of its production. This is substantial, but that means that the other half stems from other sources, such as offshore drilling. As such, the firm represents a way for investors to gain exposure to a potential recovery in gas pricing, but also a slight hedge should prices remain depressed. Oil prices have also come down in sympathy with concerns for flagging global growth prospects, but have still held up much better in comparison to natural gas [see also Want Juicy Dividend Yields? Buy the Top Five Commodity Megacaps]. [...]
[...] The United States Gasoline Fund is an exchange-traded security that tracks the movements of natural gas prices. UGA seeks to reflect the daily changes (in percentage terms) of the spot price of gasoline as measured by the daily changes of the unleaded gasoline futures contract, or RBOB. Its holdings include near-month RBOB futures, rolling when the near month contract is within two weeks of expiration, and specified U.S. Treasuries and cash. With an inception date of February 26, 2008, UGA has an expense ratio of 0.60%, total net assets of $74 million, and a three-month average daily volume of 37,000 [see also Want Juicy Dividend Yields? Buy the Top Five Commodity Megacaps]. [...]