Many commodity firms pay investors.
Lately, commodity prices have been going haywire — including the low pricing for crude oil futures, with contracts for May delivery actually closing with a negative price thanks to a glut of supply, little demand and no place to store the physical oil. Moving the other way is gold, which has surged from less than $1,500 an ounce at its March lows to about $1,700. Investing directly in commodities can be difficult and rife with volatility. However, if you invest indirectly via commodity-related companies, you can easily access this sector — and often earn a good dividend on top. If you’re interested in buying into commodities via income-generating stocks, here are seven ideas for your portfolio.
TC Energy Corp. (ticker: TRP)
TC is an energy infrastructure company that operates pipelines in the U.S., Canada and Mexico that span almost 60,000 miles. Its business also includes export terminals for liquefied natural gas and related storage facilities. That makes TC Energy less reliant on actual commodity prices, since it simply transports and stores the product — and charges other firms a fee based on the volume in its system. This more reliable “toll-taker” model can fuel more consistent dividends than a stock that depends on high commodity prices to turn a good profit.
Current yield: 5%
Cheniere Energy Partners (CQP)
Cheniere owns and operates regasification facilities, meaning it is a key link between the pipelines and tankers that carry liquefied natural gas and the distributors and eventual end-users. After all, those of us who use natural gas to heat our homes or cook meals use the vaporized form and not the more condensed but easier-to-transport liquefied natural gas. As with TRP, this business model allows CQP to simply capitalize on the normal use of gas in the economy and not suffer through the ups and downs of prices.
Current yield: 7.5%
Sociedad Quimica y Minera de Chile S.A. (SQM)
Chile-based SQM is a unique commodity stock that mines and produces specialty minerals and related salts. These include a suite of agricultural products such as potassium and industrial chemicals for lithium products that power efficient batteries for smartphones and electric cars. Many investors may not know that the building blocks of these substances can actually be found in the ground — and SQM is one of the first links in the chain of these essential commodities, meaning it can throw off consistent revenue as it brings these materials to market.
Current yield: 4.7%
Oil and gas company Sunoco is a brand name motorists will assuredly recognize. But while Sunoco’s business is challenged on one hand, thanks to the slackening of demand the outbreak has caused across its retail fuel operations, a commensurate drop in oil prices has meant input costs have also fallen dramatically. Because a big part of SUN is its refinery operations, the firm can load up on crude oil and related commodities at dirt cheap prices at present — meaning attractive margins to keep operations firm in the short term and continue to pay consistent dividends to shareholders.
Current yield: 13.2%
Rio Tinto Group (RIO)
U.K.-based Rio Tinto Group is one of the largest miners in the world, valued at more than $75 billion even after a bit of softness recently thanks to the recent global downturn. A diversified commodity stock, RIO engages in mining of minerals ranging from aluminum to silver to copper to gold to uranium. While some of these materials aren’t as in demand as they were a year ago, the bottom line is that the global economy hasn’t stopped — and these commodities are crucial to a wide array of businesses, meaning a secure bare amount of sales to support dividends from this diversified mining stock.
Current yield: 10.4%
Southern Copper Corp. (SCCO)
Much less diversified than RIO, Southern Copper rather obviously engages in mining and refining of copper at facilities primarily located in South America. There often are other minerals in those mines, including silver and gold, and SCCO also deals with these commodities — but largely as a pleasant byproduct of its copper operations. If investors want to go all-in on one vein of ore mining stock, then copper is a good choice as the metal is a key part of electronics, construction, medicine and a host of other applications. These multiple uses mean multiple demand points to help support SCCO operations and its dividend.
Current yield: 2.5%
Exxon Mobil Corp. (XOM)
Sure, the previously steady operations of Exxon don’t look so hot amid short-term pressures caused by oil less than $20 and long-term pressures caused by the move away from fossil fuels to combat climate change. However, Exxon still remains one of the largest companies in the U.S. by almost any measure with a $180 billion market capitalization and projected revenue of more than $190 billion even after recent troubles. Furthermore, income investors should note Exxon has paid a dividend in some form for more than 100 years and has increased its payout at least once annually for the past 35 consecutive years.
Current yield: 7.8%
Commodity stocks to buy for great dividends:
— TC Energy Corp. (TRP)
— Cheniere Energy Partners (CQP)
— Sociedad Quimica y Minera de Chile S.A. (SQM)
— Sunoco (SUN)
— Rio Tinto Group (RIO)
— Southern Copper Corp. (SCCO)
— Exxon Mobil Corp. (XOM)