Newmont Corporation (NYSE:NEM), Dow Inc. (NYSE:DOW), and Barrick Gold Corporation (NYSE:GOLD) represent a diverse selection of some of the best materials dividend stocks to buy now.
Materials stocks cover a wide range of companies that do everything from the mining of gold, iron ore, and other precious metals, to the manufacturing of fertilizers, plastics, and other components. Materials companies, which tend to be highly cyclical in nature, have enjoyed a banner run in recent years as demand for metals, fertilizers, and plastics has grown.
The iShares U.S. Basic Materials ETF, which contains 39 holdings from the basic materials sector, gained 19.2% in 2019, followed by 17.8% and 25.6% gains in 2020 and 2021 respectively. Another major materials ETF is the Materials Select Sector SPDR Fund (NYSEARCA:XLB), which tracks the materials companies in the S&P 500. That ETF gained 81% between 2019 and 2021 as the performance of materials companies improved across the board.
Their strong performance has allowed many top materials dividend stocks to greatly boost their payouts in recent years, such as Southern Copper Corporation (NYSE:SCCO), which more than doubled its dividend payments between 2020 and 2021.
With a recession now looming and demand in some segments of the materials sector tapering off again, materials stocks have struggled this year, with the Materials Select Sector SPDR Fund losing close to 10% of its value and the iShares U.S. Basic Materials ETF performing even worse.
That’s created an interesting inflection point for dividend investors, as many of these companies have maintained their dividends or made only slight cuts to them in recent quarters as their earnings have fallen, but have seen their yields rise in response to falling share prices. More importantly, investor concerns about their near-term performance or the safety of their dividends may be overblown, particularly when it comes to mining stocks.
In the middle of October, Barron’s writer Andrew Bary noted that investors appear to be avoiding mining stocks unnecessarily, given that many of the best high yield materials stocks have very strong balance sheets, are still pulling in solid earnings, and have strong dividends. Bary specifically mentioned a few of the diversified miners featured in this list, including Newmont Corporation (NYSE:NEM), Barrick Gold Corporation (NYSE:GOLD), and Rio Tinto Group (NYSE:RIO) as having favorable setups.
When demand rebounds and commodity prices rise again, which is expected to happen in many segments of the industry by next year, shares have the potential to rebound to 2021 levels, while dividend payments could be pushed higher than ever, ranking materials companies among the most compelling dividend stocks on the market right now.
With that in mind, let’s take a look at the 11 best materials dividend stocks to buy now, many of which have greatly raised their payouts over the last two years.
The following materials dividend stocks are ranked based on hedge fund sentiment. We follow a select group of hedge funds because Insider Monkey’s research has uncovered that their consensus stock picks can deliver outstanding returns.
All hedge fund data is based on the exclusive group of 900+ funds tracked by Insider Monkey that filed 13Fs for the Q2 2022 reporting period.
11 Best Materials Dividend Stocks To Buy Now
Number of Hedge Fund Shareholders: 8
Dividend Yield: 1.36%
Barrick Gold Corporation (NYSE:GOLD), Newmont Corporation (NYSE:NEM), and Dow Inc. (NYSE:DOW) are some of the best materials dividend stocks to buy now. Another materials company worth looking into is Korean steelmaker POSCO (NYSE:PKX), which pays out a variable dividend quarterly.
POSCO (NYSE:PKX)’s trailing 12-month dividend payouts have more than doubled since the end of 2020 despite the company skipping a quarterly payment in Q1 of this year, during which it split off its steel operations and transitioned into a holding company. POSCO pays out 30% of its net income as dividends to shareholders, which amounted to $0.7976 and $0.7382 payments during Q2 and Q3 respectively. The company’s Q3 operating profit did slump by 71% year-over-year as global steel demand weakens.
Hedge fund ownership of POSCO (NYSE:PKX) has fallen by 41% in 2022 among the select group of funds tracked by Insider Monkey’s database, hitting an all-time low in the process. Furthermore, the company’s largest shareholder as of June 30, Richard S. Pzena’s Pzena Investment Management, unloaded 92% of its PKX stake in Q3, leaving it with 84,898 shares.
Number of Hedge Fund Shareholders: 17
Dividend Yield: 3.31%
Southern Copper Corporation (NYSE:SCCO)’s dividend payments more than doubled in 2021 to $3.20 from $1.50 a year earlier, and got off to a strong start in the first half of this year, with two quarterly payouts totaling $2.25. The company has since pared back its payments to $1.25 in the second half of this year, including a $0.50 quarterly payment later this month, its lowest since 2020.
Southern Copper Corporation (NYSE:SCCO)’s EPS has fallen by about 20% year-over-year during each of the past two quarters as demand weakens and copper prices decline. Nonetheless, its $0.67 in Q3 EPS handily beat estimates, and analysts tend to prefer Southern Copper over its bigger rival Freeport-McMoRan Inc. (NYSE:FCX) thanks to its lower cost of production and ability to return more cash to shareholders.
Hedge fund ownership of Southern Copper Corporation (NYSE:SCCO) ticked up slightly during Q2 but has nonetheless fallen by 38% since the first quarter of 2021. Ken Fisher’s Fisher Asset Management owns a sizable SCCO stake as of June 30 consisting of 3.58 million shares, while Ken Griffin’s Citadel Investment Group added Southern Copper to its 13F portfolio during Q2, buying 422,183 shares.
Number of Hedge Fund Shareholders: 19
Dividend Yield: 11.2%
Global resources giant BHP Group (NYSE:BHP), which primarily mines copper, coal, and iron ore, has grown its dividend payments over each of the last two years after scaling back its payouts in 2020. Its semi-annual payments totaled $6.50 in 2022, which equates to a dividend yield of over 11%. The dividend is unlikely to remain that high for long, with the yield likely settling around the 5-6% mark in the future.
As with other mining companies, BHP Group (NYSE:BHP) has been impacted by weakening prices and demand, particularly when it comes to the company’s robust iron ore operations, which accounted for over 50% of the company’s record fiscal year 2022 EBITDA. How the Chinese economy performs in the coming quarters will be key to the company’s fortunes, as the country typically accounts for 60% or more of BHP’s revenue.
Smart money interest in BHP Group (NYSE:BHP) has remained relatively consistent over the past decade, with between 16 and 21 hedge funds being long BHP throughout the majority of that period. As with Southern Copper, Ken Fisher’s firm was the largest shareholder of BHP on June 30, while Ken Griffin’s was also buying BHP shares during Q2, raising its stake by 78% to 1.34 million.
Number of Hedge Fund Shareholders: 24
Dividend Yield: 10.6%
Rio Tinto Group (NYSE:RIO)’s dividend payments totaled $7.46 in 2020, down from over $9.50 in 2021, but well above the $3.86 paid out in 2020. Its dividend payments have grown at a CAGR of 23.7% over the last five years.
A diversified global mining company, Rio Tinto Group (NYSE:RIO) gives investors exposure to a wide range of minerals, metals, and gems like diamonds, aluminum, lithium, gold, and copper. Rio Tinto’s financial results fell across the board during the June quarter, with revenue declining by 10% year-over-year to $14.9 billion, while diluted EPS took a 27.8% hit to $2.73. In a research note to investors, Jefferies stated that the company’s earnings and cash flow were likely to continue trending down in Q3 before potentially hitting a trough in Q4.
Hedge fund ownership of Rio Tinto Group (NYSE:RIO) rose for three straight quarters beginning in Q3 2021 before dipping slightly during Q2 of this year. Quant funds Arrowstreet Capital and Renaissance Technologies held two of the largest RIO positions as of June 30, owning 10 million and 1.35 million shares respectively.
Number of Hedge Fund Shareholders: 27
Dividend Yield: 5.05%
International Paper Company (NYSE:IP) cut its quarterly dividend payments by $0.05 in the final quarter of 2021, to $0.4625 per share, a payout rate that has remained in place throughout 2022. The company has a 32-year run of making dividend payments and has a stable dividend payout ratio of less than 50% supporting its payments.
International Paper Company (NYSE:IP) shares hit a 52-week low in early October, which has contributed to the packaging company’s dividend yield soaring above 5%. IP shares took a big in September in part due to a poor earnings report and forecast from FedEx Corporation (NYSE:FDX), which frightened investors away from e-commerce packaging-related companies like International Paper, which generates more than half its revenue from the sale of corrugated packaging.
There was a 29% drop in the number of funds long International Paper Company (NYSE:IP) during the first quarter of this year, dropping smart money ownership of the stock to a two-year low. Edgar Wachenheim’s Greenhaven Associates had 4.5% 13F exposure to IP as of June 30, owning 4.99 million shares worth $209 million.
Number of Hedge Fund Shareholders: 27
Dividend Yield: 9.14%
Brazilian miner Vale S.A. (NYSE:VALE) had raised its dividend in 2020 and 2021, but was forced to scale it back this year as profits decline. The company’s two semi-annual payments this year totaled $1.4115, down from over $2.50 last year. While investors appear concerned about the future of Vale’s dividend, driving VALE shares down by 25.8% since April 1 (and ironically, making the stock’s yield even more attractive), the company remains committed to paying out a healthy dividend even as it faces headwinds in its iron ore business.
Hedge fund ownership of Vale S.A. (NYSE:VALE) has remained virtually flat for four straight quarters, but remains down by 35% since early 2017. Arrowstreet Capital made a big investment in the company during Q2, raising its stake by 960% to 20.1 million shares, while Rajiv Jain’s GQG Partners hiked its own position in the company by 22% to 19.1 million shares.
GMO LLC is thrilled with the amount of money Vale S.A. (NYSE:VALE) is returning to shareholders, as revealed in its Q1 2022 investor letter:
“Let’s look at Vale (NYSE:VALE), the world’s largest iron ore producer, as a case study for how shareholders can be rewarded. Vale’s stock price is about where it was at the beginning of last year. Despite the market’s lack of enthusiasm, the company generated about $20 billion of free cash flow last year. Not bad for a company with a market cap of a little over $100 billion and no substantive debt as of the end of March. 4 What did the company do with all that cash? Last year, Vale paid out about $9 billion in regularly scheduled dividends and distributed another $10 billion between extra dividends and share repurchases. Combined with dividends distributed in the first quarter of this year and a recently announced share repurchase, Vale has returned or announced the return of over $33 billion since the beginning of last year, almost a 32% yield relative to the market cap of the company. Not a bad way to win.”
Number of Hedge Fund Shareholders: 29
Dividend Yield: 4.09%
Chilean chemicals and fertilizers company Sociedad Química y Minera de Chile S.A. (NYSE:SQM) has greatly increased its dividend payments over the last year, vaulting it up the list of best materials dividend stocks. In the last two quarters alone, the company has paid out nearly $4.45 in dividends, more than it had paid out in the prior three years combined.
Sociedad Química y Minera de Chile S.A. (NYSE:SQM) grew revenue by 342% in the second quarter of this year, to $2.6 billion, while net income and EPS both skyrocketed by more than 800% year-over-year. The company’s lithium segment continued to be a massive growth driver in Q2, growing sales by more than 1,000% to $1.85 billion. Given the tightness in the lithium and fertilizer markets and the extended long-term growth runway for lithium, SQM is a compelling growth and dividend stock rolled into one.
Smart money ownership of Sociedad Química y Minera de Chile S.A. (NYSE:SQM) hit an all-time high in Q1 and ticked up even further in Q2, having doubled since the end of 2020. Several quant funds, which appear to have been big fans of materials stocks during Q2, were buying up SQM during the quarter, including Two Sigma Advisors, Renaissance Technologies, and Arrowstreet Capital.
Number of Hedge Fund Shareholders: 37
Dividend Yield: 5.34%
Chemicals company LyondellBasell Industries N.V. (NYSE:LYB) has an eight-year streak of raising its annual dividend payouts, giving it one of the best track records in the materials sector, which is typically fraught with cyclicality. In addition to raising its quarterly dividend payments by 5.3% in June, the company also paid out a hefty special dividend of $5.20 on June 13 in recognition of its record levels of cash generation in 2021.
While LyondellBasell Industries N.V. (NYSE:LYB)’s short-term results will be pressured by weakening demand and rising prices for natural gas (which is a key input for its plastics production), the company’s shares look like a great value proposition at the moment, trading at just 6.88x earnings. And the company’s dividend doesn’t appear to be at risk in any way, regardless of near-term headwinds, as LyondellBasell’s payout ratio is well below 40%.
The number of smart money managers long LyondellBasell Industries N.V. (NYSE:LYB) has trended down over the past five quarters after jumping by 78% in the first quarter of 2021. Two Sigma Advisors and Arrowstreet Capital added LYB to their 13F portfolios during Q2, while Steve Cohen’s Point72 Asset Management sold out of his position.
Number of Hedge Fund Shareholders: 40
Dividend Yield: 2.43%
Barrick Gold Corporation (NYSE:GOLD) began making dual quarterly dividend payments last year, which includes a performance-based payout each quarter. The company raised its quarterly payouts to $0.10 at the beginning of this year, in addition to a $0.10 performance bonus in each of the first three quarters, which dipped to $0.05 for the fourth quarter. With gold prices expected to rise as much as 10% in 2023, the company is well positioned to continue paying out an attractive dividend. Barrick Gold pulled in $2.53 billion in revenue and $0.13 in non-GAAP EPS in Q3, both of which beat estimates.
Hedge fund ownership of Barrick Gold Corporation (NYSE:GOLD) peaked in the first quarter of 2020 at the height of pandemic fears, but has trended down since, falling by 26%. First Eagle Investment Management held the largest position in GOLD on June 30, owning over 26.6 million shares worth $471 million.
The ClearBridge Investments International Growth EAFE Strategy likes the work Barrick Gold Corporation (NYSE:GOLD) has done to delever its balance sheet and return more money to shareholders, as the fund discussed in its Q1 2022 investor letter:
“Also within the structural bucket, we have selectively added to our commodity exposure with the purchase of Barrick Gold (NYSE:GOLD). Canadian mining company Barrick Gold is a play on operating improvements. The company has aggressively delevered its balance sheet and reduced capex spending to a lower level more permanently, directing its healthy free cash flow to dividends and buybacks.”
Number of Hedge Fund Shareholders: 45
Dividend Yield: 5.27%
Dow Inc. (NYSE:DOW), which provides packaging, plastics, and specialty coatings, among other products, has maintained a $0.70 quarterly dividend since being split off from DuPont de Nemours, Inc. (NYSE:DD) in 2019. While the dividend hasn’t grown at all in over three years as the company instead focuses on paying down its debt, it nonetheless boasts two of the most attractive components of a good dividend, which are a nice yield (over 5%) and a low payout ratio (less than 50%).
Dow Inc. (NYSE:DOW) shares have slumped this year as oil and gas prices have risen, which raise the costs associated with Dow’s many manufacturing processes. There is likewise some concern that demand for the company’s products will slump considerably during a recession, though management has stated that packaging and plastics volumes only decline by about 2% to 3% during lean economic periods. In the first half of this year, Dow’s free cash flow grew to $2.7 billion, up from $2.1 billion during the year-ago period.
Hedge fund ownership of Dow Inc. (NYSE:DOW) has remained relatively steady over the past two years, with the number of funds holding DOW in their 13F portfolios never falling below 39 or topping 47 during that time. Richard S. Pzena’s Pzena Investment Management added to its already sizable DOW holding during Q3, raising by 20% to 7.51 million shares worth $330 million.
Number of Hedge Fund Shareholders: 56
Dividend Yield: 4.73%
Topping the list of best materials dividend stocks to buy now is Newmont Corporation (NYSE:NEM), which has raised its dividend by a hefty CAGR of 57.8% over the past five years. Its quarterly payouts now amount to $0.55, up from an average of just $0.0625 in 2017. The company’s payout ratio is now hovering around 100% however as it’s become significantly more expensive for the company to mine for gold in recent quarters.
Newmont Corporation (NYSE:NEM) adjusted EPS of $0.27 in the third quarter was only a little more than half what analysts were expecting, while its sales of $2.63 billion were down from $2.9 billion last year. In the second quarter, Newmont’s cost per ounce jumped by 23% due to intensifying energy and labor costs. However, the company doesn’t anticipate costs rising any higher, and they should be offset partially by rising gold prices over the coming year. Boasting a good portfolio of assets and a strong commitment to returning money to shareholders, Newmont is a materials dividend stock that should be on the radars of all dividend investors.
Newmont Corporation (NYSE:NEM) is the most popular materials dividend stock among hedge funds, having hit an all-time high in ownership among smart money managers during Q2. There’s been a 23% rise in the number of funds long NEM in 2022. Rajiv Jain’s GQG Partners owned 34.8 million shares of Newmont on June 30 worth $2.08 billion. The company accounted for a 5.09% stake in the fund’s 13F portfolio and ranked as its fifth-largest holding.