In this article, we discuss the 10 commodity dividend stocks with over 4% yield.
The commodity market is thriving, fueled by increased demand for energy, raw materials, and agricultural products as the world resumes economic activity following the pandemic. Oil, natural gas, and precious metals prices have risen in the previous year, resulting in record profits for major commodity companies around the world. The sector’s continuous upswing attracts investors who see commodity assets as a hedge against inflation.
Commodities outperformed in 2021 and will continue to do so this year, bolstered by the ongoing conflict between Russia and Ukraine, according to market analysts. Refinitiv’s CoreCommodities CRB Index, a pool of 19 commodities that serves as a representative indicator of commodity markets including energy, metals, and agriculture, is up 28.9% year to date and up 58.4% in the previous year as of March 22.
As a result of the surge in energy and raw material prices last year, major commodity companies such as Vale S.A. (NYSE:VALE), Exxon Mobil Corporation (NYSE:XOM), and Rio Tinto Group (NYSE:RIO) all reported record profits, allowing them to provide greater returns to shareholders through dividends and share repurchases.
Our Methodology
We looked for dividend-paying commodity stocks that offer a dividend yield higher than 4% and ranked them from lowest to highest yield. We selected highly rated commodity companies on our list that are operating in the oil and gas, basic material, and precious metals sectors.
Commodity Dividend Stocks With Over 4% Yield
10. Valero Energy Corporation (NYSE:VLO)
Dividend Yield as of March 21: 4.33%
Number of Hedge Fund Holders: 35
Valero Energy Corporation (NYSE:VLO) claims itself as the world’s largest independent refinery, managing 15 refineries in the US, Canada, and the UK. The Texas-based company is also one of the biggest producers of corn ethanol globally. Valero Energy Corporation also engages in renewable energy generation, with 33 wind turbines in the US.
Valero Energy Corporation reported strong fourth-quarter earnings, owing to higher refinery throughput volumes and a higher refining margin. In the period, the company reported earnings per share of $2.47, exceeding analyst expectations by $0.63. Besides that, between October and December, the company generated more volume, with refining throughput volumes climbing to 3,033 MBbls/d, up from 2,550 MBbls/d in Q4 2020.
Aside from consistently exceeding earnings expectations in the previous quarters, Valero Energy Corporation also offers an attractive dividend yield of 4.33% to investors. As of March 21, the stock returned nearly 32% to shareholders in the past three months.
Market analysts see Valero Energy Corporation is about to ride the energy sector bull run given the continuous rally in natural gas prices. On March 8, BofA analyst Doug Leggate increased his price target for the commodity stock to $135 from $107 with a Buy rating. Meanwhile, a total of 35 hedge funds were long Valero Energy Corporation in Q4 2021, up from 32 funds in the quarter earlier.
9. Enviva Inc. (NYSE:EVA)
Dividend Yield as of March 21: 4.34%
Number of Hedge Fund Holders: 5
Sustainable wood pellet producer Enviva Inc. (NYSE:EVA) is another high dividend-paying stock coming from the basic materials sector. In February, Enviva Inc. upped its quarterly dividend payout to $0.86 per share, leading to an annual dividend of $3.30 per share. The company also reiterated its full-year dividend guidance of $3.62 per share for 2022, representing a 10% increase over 2021.
Enviva Inc. produces wood pellets utilized in bioenergy in ten plants located in six different states across the United States. Over the next five years, the Maryland-based wood pellet producer plans to double its wood pellet production capacity to around 13 million metric tons per year. In its fourth-quarter earnings report, the company announced a number of corporate customer agreements, including a 15-year contract with a new European industrial customer. The agreement calls for annual volumes of around 600,000 metric tons per year by 2030, with initial deliveries beginning in 2023. Following this announcement, RBC Capital analyst Elvira Scotto increased her price target for Enviva Inc. to $85 from $78 and maintained her Outperform rating on the shares.
As of the end of December 2021, Inclusive Capital held the largest position in Enviva Inc.. The San Francisco-based investment management firm owns 5.7 million shares of the clean energy stock worth over $402 million. Just like Vale S.A., Exxon Mobil Corporation, and Rio Tinto Group, Enviva Inc. is one of the high-yielding commodity stocks that look appealing to income investors.
8. LyondellBasell Industries N.V. (NYSE:LYB)
Dividend Yield as of March 21: 4.41%
Number of Hedge Fund Holders: 35
Chemical and plastic company LyondellBasell Industries N.V. (NYSE:LYB) is one of the high-yielding dividend stocks in the materials sector. The Houston-based company has consistently increased its annual dividend payout in the last 11 years. Offering a yield of 4.41%, LyondellBasell Industries N.V. currently pays its shareholders an annual dividend of $4.52 per share. In addition, the company repurchased 4.2 million shares in Q4 2021, valued at $0.5 billion.
The company offers attractive shareholder return programs which makes LyondellBasell Industries N.V. one of the good investment options in diversifying investors’ portfolios. In the post-pandemic period, the company is optimistic about the recovering demand for both goods and services as stated in its outlook in its Q4 earnings report. As a result, BMO Capital analyst John McNulty lifted LyondellBasell Industries N.V.’s (NYSE:LYB) price target from $95 to $103 and maintained his Market Perform rating on the stock. McNulty believes that continued strong consumer spending in key end markets such as packaging, housing, and automobiles will benefit the Houston-based packaging company.
35 elite funds held stakes in LyondellBasell Industries N.V. at the end of the fourth quarter of 2021, compared to 39 in the previous quarter. Eagle Capital Management, led by Boykin Curry, owns the most shares in LyondellBasell Industries N.V., with a total holding of $282 million.
Here is what Miller Howard Investments has to say about LyondellBasell Industries N.V. in its Q3 2021 investor letter:
“We initiated a position in LyondellBasell (LYB). Chemical markets are currently robust given the combination of 2020 plant shutdowns and strongly recovering demand. Despite the tailwinds, Lyondell trades at a low valuation and yields just under 5%.”
7. Exxon Mobil Corporation (NYSE:XOM)
Dividend Yield as of March 21: 4.47%
Number of Hedge Fund Holders: 71
Oil giant Exxon Mobil Corporation is one of the oil companies profiting from the current geopolitical situation with shares jumping 6.26% in the last month, as of March 21. For the past 39 years, Exxon Mobil Corporation has increased its annual dividend payment to shareholders.
The Texas-based oil and gas producer released its Q4 earnings report in February with a net income of $8.9 billion or $2.08 EPS, beating estimates by $0.12. Exxon Mobil Corporation is also strengthening its balance sheet by repaying $9 billion in debt in the fourth quarter, bringing the total debt repayment to $20 billion in 2021. Exxon Mobil Corporation achieved record profitability in 2021, owing to strong oil and gas demand and an increase in commodity prices, which resulted in total revenue of $286 billion for the year.
According to Insider Monkey’s Q4 13F filings, 71 hedge funds held stakes in Exxon Mobil Corporation at the end of December 2021, for a total stake value of $5.39 billion, up from 64 funds in Q3 2021, for a total stake value of $4.64 billion.
6. Southern Copper Corporation (NYSE:SCCO)
Dividend Yield as of March 21: 5.38%
Number of Hedge Fund Holders: 19
Southern Copper Corporation (NYSE:SCCO), one of the largest copper producers in the world, offers a dividend yield of 5.38%. The company operates copper mining facilities in Peru, Argentina, Ecuador, Mexico, and Chile. In 2021, Southern Copper Corporation produced 958,200 tons of copper, surpassing the full-year estimate by 1.6%. The Arizona-based miner expects to produce 922,000 tons of copper in 2022 and 1.8 million tons annually by the end of the decade.
Southern Copper Corporation’s (NYSE:SCCO) fourth-quarter revenue increased 20.1% to $2.8 billion, and full-year sales grew 36.9% year over year to $10.9 billion, a record-high net sales. As of March 21, the stock delivered 34.2% returns to investors in the past three months.
Southern Copper Corporation is one of the commodity stocks that hedge funds are keeping an eye on along with Vale S.A., Exxon Mobil Corporation, and Rio Tinto Group. According to Insider Monkey data, 19 hedge funds held a stake in Southern Copper Corporation at the end of the fourth quarter of 2021, compared to 23 in the preceding quarter. Ken Fisher’s Fisher Asset Management holds the largest stake in the copper mining company with a total stake of $222 million.
5. Devon Energy Corporation (NYSE:DVN)
Dividend Yield as of March 21: 6.86%
Number of Hedge Fund Holders: 51
Another high-yielding dividend stock from the energy sector is Devon Energy Corporation (NYSE:DVN), an independent oil and gas company based in Oklahoma. In February, the oil and natural gas company declared a quarterly dividend of $1 per share. In addition, Devon Energy Corporation increased cash returns in Q4 2021 by executing its share-repurchase program, where the company repurchased 14 million shares for a total cost of $589 million.
In 2021, Devon Energy Corporation generated $2.9 billion of free cash flow, the highest in the company’s 50-year history. The Oklahoma-based oil company also exceeded its volume guidance in the fourth quarter, with total production averaging 611,000 oil-equivalent barrels (Boe) per day.
Devon Energy Corporation attracted more hedge funds in the fourth quarter of 2021. 51 out of 924 elite funds tracked by Insider Monkey held stakes in the oil producer at the end of December 2021, up from 48 in Q3. Florida-based investment asset management firm GQG Partners increased its stake in Devon Energy Corporation in Q4 by 5%, bringing its total holdings to 14.5 million shares.
4. Sibanye Stillwater Limited (NYSE:SBSW)
Dividend Yield as of March 21: 7.38%
Number of Hedge Fund Holders: 10
With a yield of 7.38%, Sibanye Stillwater Limited (NYSE:SBSW) is one of the high-yielding dividend stocks from the mining sector. The South African mining company has a five-year dividend growth rate of 44.29%. In 2021, Sibanye Stillwater Limited paid its shareholders a total of $1.23 billion in dividends and $575 million in share repurchases.
Given that Russia, one of the world’s largest mineral-producing countries, is in conflict with Ukraine, market analysts are optimistic about Sibanye Stillwater Limited’s (NYSE:SBSW) significant market share in the global precious metal and minerals sector. On March 10, Deutsche Bank analyst Liam Fitzpatrick increased his price target for Sibanye Stillwater Limited to $21 from $18.50 and maintained his Buy rating on the shares. As of March 22, the mining stock gained 45% in the past three months.
Similarly, hedge funds increased their stake in Sibanye Stillwater Limited during the fourth quarter, with 10 of the 924 funds tracked by Insider Monkey reported owning shares in the company in the period, up from 9 in the previous quarter.
In its Q3 2021 investor letter, Desert Lion Capital mentioned Sibanye Stillwater Limited and discussed its stance on the firm. Here is what the fund said:
“Sibanye Stillwater is one of the largest PGM (platinum group metal) producers in the world with major operations in South Africa and the U.S. They also have gold mining operations in SA. There is significant upside optionality in their growing lithium, nickel, and uranium activities, which are not yet contributing to earnings and not recognized by the market in SSW’s price.
During the third quarter, the company reported record earnings for the interim period ended June 2021. TTM EPS was R12.03, placing the stock on a PE multiple of 4. Cash generation was excellent, and the company is effectively debt-free with surplus net cash. The management team continues to stay disciplined in their capital allocation, using cash profits to settle debt, repurchase 5% of the company’s shares at a discount, pay a healthy dividend (~11% annualized dividend yield), and expand their battery metals strategy with lithium and nickel acquisitions… (Click here to see the full text)
..Sibanye Stillwater is a well-managed, profitable business with excellent capital allocation discipline. I view it as a dividend-paying call option on the normalization of auto manufacturing, climate change initiatives, and inflation. The company’s lithium, nickel, and uranium activities also position them to participate in the continued drive towards “cleaner” energy, and so far, these options are not priced in at all.”
3. BHP Group Limited (NYSE:BHP)
Dividend Yield as of March 21: 10.17%
Number of Hedge Fund Holders: 21
BHP Group Limited (NYSE:BHP) is the biggest mining company in the world having a market cap of $255 billion as of March 22. The Australian miner offers a high dividend yield of 10.17% which draws more income investors. BHP Group Limited earned $9.4 billion in net income in the second half of 2021, allowing the mining company to declare a record interim dividend of $7.6 billion to shareholders in February.
The Australian miner produces iron ore, copper, nickel, and metallurgical coal in more than 90 locations around the world. In its Q4 earnings report, BHP Group Limited announced a $6.5 billion capital and exploration expenditure for full-year 2022. Recently, HSBC analyst Shilan Modi highlighted the miner’s operational improvements over the past five years and initiated a Hold rating for BHP Group Limited. At the end of the fourth quarter of 2021, 21 funds had stakes in BHP Group Limited, up from 18 at the end of the third quarter.
2. Rio Tinto Group (NYSE:RIO)
Dividend Yield as of March 21: 10.51%
Number of Hedge Fund Holders: 22
Rio Tinto Group is another high-paying dividend stock from the mining sector. The London-based miner pays its shareholders an annual dividend of $7.93 per share and has a five-year dividend growth rate of 36.04%. Last year, the company paid a total of $16.8 billion in dividends. Rio Tinto Group’s (NYSE:RIO) generous shareholder return program stems from the company’s dominant position in the thriving commodity sector. The company reported a net income of $21.1 billion in 2021, a 116% increase over the previous year.
Rio Tinto Group is in the process of terminating commercial relationships with Russian companies following the announcement by the Australian government of a ban on aluminum exports to Russia. As of March 22, Rio Tinto Group shares jumped 18% in the previous three months.
At the end of the fourth quarter of 2021, 22 hedge funds held stakes in Rio Tinto Group, with total holdings amounting to $1.84 billion. While in the previous quarter, only 18 funds held stakes in the London-based mining company.
1. Vale S.A. (NYSE:VALE)
Dividend Yield as of March 21: 11.91%
Number of Hedge Fund Holders: 25
Vale S.A. is one of the biggest iron ore producers in the world. The Brazilian miner offers a dividend yield of 11.91%. In February, the mining behemoth declared $3.5 billion in interim dividends to shareholders. As of March 22, shares of Vale S.A. jumped 42% in the past three months.
As global economic activity returns to pre-pandemic levels, Vale S.A. is one of the iron ore producers that has benefited from increased iron ore demand. In 2021, the company’s iron ore production grew 5.1% from 2020. Vale S.A.’s (NYSE:VALE) net income came in at $22.4 billion, an increase of 360% year over year.
As of the end of December 2021, Fisher Asset Management holds the largest stake in Vale S.A. worth $434 million. Overall, 25 funds of the 924 elite funds tracked by Insider Monkey reported owning stakes in Vale S.A. at the end of the fourth quarter.
Miller Value Partners, in its Q3 2021 investor letter, mentioned Vale S.A. and discussed its stance on the firm. Here is what the fund said:
“Vale (VALE) was the top detractor over the quarter, falling 32.6% in sympathy with iron ore’s 48% decline from record highs on China capacity curbs and growing fears of financial issues within the property sector. Vale reported Q2 EBITDA of $11.24Bn, slightly below consensus of $11.47Bn on higher than expected iron ore cash costs. Free cash flow of $6.5Bn (35% annualized yield) came in well ahead of expectations, driving $2.6Bn of stock buybacks and a 1H21 dividend of $7.6Bn, implying year-to-date (YTD) shareholder returns of roughly $13.8Bn (19% of the current market cap). Management maintained FY21 production guidance for iron ore of 315-335 Metric tons (Mt) and lowered year-end 2022 exit capacity to 370Mt (from 400Mt) due to Northern System licensing delays. Additionally, the company hosted their annual Investor Day, outlining new production initiatives aimed at becoming a key supplier to steelmakers in light of decarbonization goals.”
You can also take a peek at the 10 Best High Dividend Stocks to Buy Now and Michael Burry’s Warning On Inflation and His Top 6 Stock Picks.
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This article is originally published at Insider Monkey.
