Where to Start: Basic Materials – Freeport-McMoRan Copper & Gold Inc. (FCX), Silver Wheaton Corp. (USA) (SLW), Alcoa Inc (AA)

Dividend and yields: Alcoa pays an annual dividend of $0.12 for a payout ratio of 52%, with a yield of 1.4%. Its average annual yield over the last five years was 2.1%.

SLW currently distributes an annual dividend of $0.56, yielding 2.3% with a payout ratio of 21%.

FCX pays back its investors an annual $1.25 per share dividend for a yield of 4.1% and an average yield over five years of 3.6%.

There are also several exchange traded funds specializing in the basic materials sector, three of which are listed below:

Materials Select Sector SPDR (NYSEMKT:XLB) Fund

The Materials Select Sector SPDR Fund seeks to match the returns and characteristics of the S&P Materials Select Sector Index. The fund has 31 stocks in the industry, including FCX, which accounts for 6% of its holdings, and Alcoa, which accounts for 1.92%. The fund has an expense ratio of 0.18%. Currently, XLB is trading around $40, which is also a 52-week high.

iShares Dow Jones U.S. Basic Materials

The fund corresponds to the Dow Jones U.S. Basic Materials Index. The fund holds 63 equities from the sector, including FCX, which accounts for 6% of its holdings, and Alcoa, which accounts for 1.92%. Total Market Index. The fund has an expense ratio of 0.46%.  Currently, IYM is trading around $72, which is also a 52-week high, similar to XLB.  With both of these ETFs trading at a 52-week high, your best bet may be to wait for a pullback before investing.

It is clear that there are a wide variety of companies in the basic materials industry, and each one has its pros and cons.  From the three companies above, many would agree that Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) and Silver Wheaton Corp. (NYSE:SLW) are the most attractive, with good yields, strong outlooks, and recent slumps providing a good time to buy.  However, Alcoa continues to be popular with many people, and should not be overlooked.

In the end, if you can’t make up your mind, the ETFs discussed above are great ways to invest in the industry (and the companies discussed) without choosing a single company.  For many people with less money to invest, these ETFs are a great way to get exposure to the industry and a wide variety of companies.

The article Where to Start: Basic Materials originally appeared on Fool.com and is written by Daniel Murray.

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