In this article we discuss 10 best material dividend stocks to buy now.
Materials stocks are volatile, linked to fickle factors like commodities, oil prices, construction industry and consumer spending trends. The coronavirus crisis squashed the materials industry as demand fell. However, following the availability of vaccines, the demand is coming back and strengthening commodity prices indicate that a strong bull run for materials stocks is starting. Goldman Sachs recently said in a report that the current recovery after the coronavirus vaccines is not temporary, and we might be seeing a “much longer structural bull market for commodities.”
Prices for commodities such as soyabean, copper, oil, nickel and silver are rising. Talking to Financial Times, SummerHaven’s Kurt Nelson said:
“This is really unusual. We’ve looked back 50 years and we’ve never seen this basket of commodities all go up at once.”
Growth Catalysts for Materials Stocks in 2021 and Beyond
But materials is a vast industry. It has several growth catalysts, including construction and engineering, which is booming worldwide. Construction materials stocks are resilient during difficult times. According to a report by Deloitte, the engineering and construction industry learned from the 2008 recession and was well-positioned to weather the economic effects of the coronavirus. In the first quarter of 2020, the construction industry added $900 billion to the U.S. economy, its highest level since the 2008 recession.
S&P 500 Materials sector is up 43% year to date, compared to the base index’s gain of about 32% in the same period.
According to a report, the global core materials market alone is expected to reach $3.40 billion by 2027, growing at a CAGR of 15.5% during the period. The report said that key growth catalysts for core materials include an increasing use of composites in the aerospace industry and wind energy segment. Core materials increase the strength of materials used in aerospace and defense products because of their thickness.
The coronavirus crisis has made stock-picking extremely difficult even for expert investors. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 88 percentage points since March 2017. Between March 2017 and February 5th 2021 our monthly newsletter’s stock picks returned 187.5%, vs. 75.8% for the SPY. Our stock picks outperformed the market by more than 111 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Choosing Dividend Stocks in Materials Sector
Given the resilience and strong growth prospects of material stocks, we decided to mention the top stocks from the sector that are also offering attractive dividends. For that we didn’t just look for high yields. While choosing dividend stocks, we usually give preference to companies which are consistent in paying dividends. In this article we tried to pick the best material stocks that have a history of offering consecutive dividend hikes over a period of several years.
With this industry outlook and growth catalysts in mind, let’s start our list of 10 best material stocks to buy now.
10. Oil-Dri Corporation of America (NYSE: ODC)
Number of Hedge Fund Holders: 4
Dividend Yield: 2.92%
Illinois-based Oil-Dri sells sorbent products, which are used to adsorb liquids or gases. The company’s customers include drug stores, dollar stores, cleaning product makers, animal health product makers, sports retailers, bleach makers and fuel companies. The company has increased its dividend consistently for the last 17 years.
Mario Gabelli’s GAMCO Investors is one of the leading shareholders of Oil-Dri Corp. with 493,506 shares, worth $16.8 million. Overall, 4 hedge funds in our database had stakes in the company at the end of December 2020.
9. Compass Minerals International, Inc. (NYSE: CMP)
Number of Hedge Fund Holders: 10
Dividend Yield: 4.37%
Kansas-based Compass Minerals is a major producer of minerals, including salt, magnesium chloride, sulfate of potash and plant nutrition products. As of May 2020, the company has paid dividends for 66 consecutive quarters. In the fourth quarter, the company posted a non-GAAP EPS of $0.62, missing the Street’s forecasts by $0.72. Revenue in the quarter slid 15%. The company said harsh winters, devaluation of the Brazilian real, higher costs in Plant Nutrition North America segment and the coronavirus-related impact weighed on its quarterly results.
A total of 10 hedge funds tracked by Insider Monkey’s database of 887 funds held stakes in Compass Minerals, compared to 14 funds in the third quarter. Among these funds is Jeffrey Bronchick’s Cove Street Capital, who owns 526,294 shares of the company, having a total worth of $32.5 million.
8. Balchem Corporation (NASDAQ: BCPC)
Number of Hedge Fund Holders: 13
Dividend Yield: 3.32%
Balchem is one of the best material dividend stocks to buy now. It sells specialty performance ingredients related to food, nutritional, feed, pharmaceutical, medical sterilization and industrial markets. In December, the company increased its quarterly dividend by 11.5%. As of 2020, the company has increased its dividend for 11 consecutive years.
Insider Monkey’s database shows that 13 hedge funds had Balchem shares in their portfolios at the end of the fourth quarter, down from 16 funds a quarter earlier.
7. Sensient Technologies Corporation (NYSE: SXT)
Number of Hedge Fund Holders: 17
Dividend Yield: 2.45%
Wisconsin-based Sensient Technologies makes colors, flavors and fragrances. In the fourth quarter, the company posted non-GAAP EPS of $0.61, meeting the Street estimates. GAAP EPS of $0.59 missed the Street’s estimates by $0.02. Revenue in the quarter jumped 5% to $334.66 million, beating the consensus forecast by $23.92 million.
Our database shows that 17 hedge funds held stakes in SXT at the end of December, versus 22 funds in the third quarter.
6. MDU Resources Group, Inc. (NYSE: MDU)
Number of Hedge Fund Holders: 20
Dividend Yield: 2.96%
North Dakota-based MDU Resources supplies construction materials, including ready-mixed concrete, asphalt, liquid asphalt and other related products. The company has increased its dividend for 30 consecutive years. The stock has gained about 9% year to date. In the fourth quarter, the company posted a GAAP EPS of $0.56, above the analysts’ forecasts by $0.04. The company’s CEO David Goodin said that MDU started off 2021 with “many opportunities” for electric and natural gas utility investments.
Over the last 3 months, MDU shares have gained over 13.77%. AQR Capital Management is one of the biggest shareholders of MDU Resources Group Inc., with 1.67 million shares of the company, worth about $43.5 million. As of the end of the fourth quarter, 20 hedge funds in Insider Monkey’s database of 887 funds held stakes in MDU compared to 23 funds in the third quarter.
5. BHP Group (NYSE: BHP)
Number of Hedge Fund Holders: 20
Dividend Yield: 5.61%
BHP is one of the biggest mining companies in the world. The Australia-based company produces various commodities, including iron ore, metallurgical coal, copper and uranium. With a dividend yield of 5.6% and market cap of $196 billion, BHP is one of the best material dividend stocks to buy now. In January, the company posted a 6% year-over-year increase in iron ore production for the six months ended Dec. 31. On March 1, the company declared a dividend of $2.02/ADS.
According to our database, the number of BHP Group’s long hedge funds positions increased at the end of the fourth quarter of 2020. There were 20 hedge funds that hold a position in BHP by the end of December, compared to the 18 funds in the third quarter. The biggest stakeholder of the company is Fisher Asset Management, with 7.8 million shares, worth $509.7 million.
4. Reliance Steel & Aluminum Co. (NYSE: RS)
Number of Hedge Fund Holders: 27
Dividend Yield: 1.97%
Reliance Steel is one of the best material dividend stocks to buy now, as the company has paid regular dividends for 61 consecutive years without suspensions. Reliance Steel deals in metals like aluminum, brass, alloy, copper, titanium, carbon steel, stainless steel and also provides services related to metals processing. The Fortune 500 company recently posted Q4 results, beating the analysts’ forecast for EPS, while revenue came in-line with the Street’s forecasts.
Royce & Associates is one of the 27 hedge funds tracked by Insider Monkey who held stakes in the company at the end of the fourth quarter of 2020. The fund owns 477,846 shares of the company, having a total worth of $57.2 million.
3. Nucor Corporation (NYSE: NUE)
Number of Hedge Fund Holders: 29
Dividend Yield: 2.63%
North Carolina-based Nucor is one of the biggest steel companies in the U.S. The company also operates about 23 scrap-based steel production mills. In 2019, the company sold about 18.6 million tons of steel and recycled 17.8 million tons of scrap. The company has increased its regular or base dividend for 48 consecutive years. In the last 10 years, Nucor has returned a whopping $6 billion in capital to its stockholders in the form of buybacks and dividends.
There were 29 hedge funds in our database that held stakes in Nucor Corporation, compared to 28 funds in the third quarter. D E Shaw is the biggest stakeholder in the company.
2. Vulcan Materials Company (NYSE: VMC)
Number of Hedge Fund Holders: 44
Dividend Yield: 0.86%
Vulcan Materials is one of the best material dividend stocks to buy now. The company sells gravel, crushed stone, sand and other construction materials. On Feb. 12, the company increased its quarterly dividend by 8.8%. In the fourth quarter, Vulcan Materials earned $1.07 per share, beating the Street’s consensus by $0.08. Revenue in the period came in at $1.18 billion, beating the Wall Street by $20 million.
As of the end of the fourth quarter, 44 hedge funds in Insider Monkey’s database of 887 funds held stakes in Vulcan Materials Company, compared to 42 funds in the third quarter. Egerton Capital Limited is the biggest stakeholder in the company, with 1.7 million shares, worth $250.1 million.
1. The Sherwin-Williams Company (NYSE: SHW)
Number of Hedge Fund Holders: 49
Dividend Yield: 0.95%
Ohio-based Sherwin-Williams is one of the best material dividend stocks to buy now. The company makes paints, coatings and floor coverings. It has raised its dividend for 42 consecutive years. In February, the company increased its quarterly cash dividend by 23.1%. Its board recently approved a three-for-one stock split.
The Sherwin-Williams Company tops the list of 10 material dividend stocks to buy now as 49 hedge funds tracked by Insider Monkey held stakes in the company at the end of the fourth quarter of 2020. Chilton Investment Company is the biggest stakeholder in the company, with 415,447 shares, worth $305.3 million.
In one of their 2020 investor letters, Diamond Hill Capital highlighted a few stocks and Sherwin-Williams Co (NYSE:SHW) is one of them.
Here is what Diamond Hill Capital said about the company:
“We initiated a position in high-quality paints and coatings retailer Sherwin-Williams Co. Sherwin’s crown jewel is its North American paint stores, which cater primarily to professional painting contractors. There has been a two-decade trend of homeowners hiring painting contractors instead of doing it themselves, which we believe is likely to continue. The pricing power of Sherwin-branded paint is very strong and the store network, which continues to expand, generates very strong returns on invested capital. Longer term, there is additional opportunity to improve margins from businesses acquired from Valspar.”
You can also take a peek at Billionaire Julian Robertson On Interest Rates and His Top Stock Picks For 2021 and Billionaire Julian Robertson’s Top 10 Stocks.
Follow Insider Monkey on Twitter
Suggested articles:
- 10 Best Mortgage Stocks To Buy Now
- 15 Most Valuable Alcohol Companies
- 15 Fastest Growing Biotech Companies in the US
Disclosure: None. 10 Best Material Dividend Stocks To Buy Now is originally published on Insider Monkey.
