Strong opinions circulate in investment circles regarding whether we've seen the end of the powerful bull market in commodities. Some believe the move to be moribund, laid low by the twin evils of the sub-prime lending fiasco and the subsequent government action to rectify the damage (from which some claim we will never recover). Others see a silver lining in a host of new infrastructure commitments made by central governments the world over that they believe will only buoy the price of commodities going forward.
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If you're cautiously optimistic about the prospects of commodities, here are a number of stocks to consider. Not your average metals and mining issues, these companies possess compelling fundamentals in general, and strong dividend yields in particular. They're all foreign-based enterprises with ADRs that trade on the NYSE. (Learn more about ADRs in our ADR Basics Tutorial)
Chilean Investing - With Graham and Dodd
Madeco SA (NYSE:MAD) is a Chilean-based manufacturer of flexible copper and aluminum products used in the mass consumer market, primarily for snack food and cosmetics packaging. The company's shares have risen nearly 90% since late April, when they sold for a mere $3.82 per share. They are now valued at nearly $7.00.
Madeco shares offer investors an above-average dividend yield of about 8% and trade with a one-year trailing P/E of just 2.14. But more impressive are its price-to-book and price-to-sales ratios, the former a mere 0.50 and the latter a miniscule 0.30. Investors would be hard pressed to find any other stock boasting metrics like these.
BHP Billiton PLC (NYSE:BBL) is a global mining giant with interests in aluminum, copper, iron ore, nickel, uranium, gold, zinc and diamonds - to name just a few. The company has a market capitalization of $126 billion, trades with a P/E of 8.2 and offers investors a reasonable 3.6% annual dividend.
The company’s stock price is up nearly 70% since March amid a very active campaign of asset sales and job cuts.
Down Under for Over-The-Top Yields
Alumina Limited (NYSE:AWC) stock is up 130% from 52-week lows set in March. This Australian-based company has interests in a global network of mines, refineries and smelters in Australia, the United States, Guinea, Suriname, Jamaica, Brazil and Spain. Alumina trades with a P/E multiple of 11.5x last year's earnings and yields an impressive annual 14% dividend. The P/B for Alumina is just 0.77.
The company just completed a successful $730 million sale of new equity to help pay down debt.
The Wrap
Though most mining companies are not in the business of paying shareholders dividends, these three outfits have and continue to do so. For those who still believe the commodities bull has some breath left in it, collecting a handsome yield as the sector rises is certainly a worthwhile investment idea to consider. (See Dividend Yield For The Downturn to learn more about dividends in a recession.)
