Investors have been wisely diversifying their portfolios to provide exposure to more than just U.S. stocks. Whether it’s emerging markets, real estate or gold bullion, a broad-based approach provides for a better night’s sleep.
Yet it’s fair to ask: Do commodities also have a place in your portfolio? After all, they seem to rise and fall with alacrity, and investors often only notice them after they’ve made sharp gains or plunges. Truth is, we have no crystal ball that tells us how this group will fare in 2013. We can look at the supply and demand backdrop for various commodities, but much hinges on the health of global economies.
Yet if you look beyond 2013, then you can be assured that each commodity will have its day in the sun. The key to is to buy various commodities (or the stocks that represent them) when they are out of favor, but must also be nimble enough to sell them when they have posted major gains.
Here’s what we do know: There are a number of dominant commodity producers currently sporting impressive dividend yields. And such high yields can support an underlying stock price if the going gets tough.
Here are 10 commodity-focused stocks with currently impressive dividend yields.
Southern Copper: Too good to be true?
Whenever you see a stock with a double-digit yield, as is the case with copper, iron and zinc miner Southern Copper Corp (NYSE:SCCO), it’s important to see whether investors sense a dividend cut coming. Well, unlike many yield-oriented firms, this company’s management isn’t wedded to the notion of year-after-year rising payouts.
In 2009, Southern Copper’s dividend fell as low as 44 cents a share, before rising to an all-time high of $2.43 a share in 2011. Going back during the past six years, the average payout has been $1.73 a share. Looking ahead, management has plans to sharply boost output — especially of copper — beginning in 2014. If you’re willing to assume that copper prices stay at or above current levels on average, then the rising output should fuel a rising payout. Let’s call it an average dividend of $2 a share in coming years. That works out to be a 5.5% dividend yield — which is solid, though not as impressive as the current yield of 10% may imply.