3 Modestly Priced Materials Stocks for your Watch List
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In today’s zero interest rate environment, investors continue to search for yield. Investors starved for income could do well by digging deeper into the basic materials sector. This list includes companies that are trading for reasonable valuations. In addition to promising growth, these three stocks provide investors a solid income stream as well.
Air Products & Chemicals (NYSE: APD) is an $18 billion provider of atmospheric, process, and specialty gases worldwide. The company has paid a cash dividend to shareholders every year since 1954 and has increased its dividend payments for 30 consecutive years. At current prices, the stock yields nearly 3%.
Air Products & Chemicals released fiscal first-quarter 2013 results a few weeks ago, and the results were largely positive. Revenues rose 10.4% year over year to $2.5 billion. Meanwhile, consolidated net income from continuing operation increased 22.6% year over year to $276.9 million.
ArcelorMittal (NYSE: MT) is an intriguing stock for investors interested in international diversification. The integrated steel and mining company, based in Luxembourg, carries a $25 billion market capitalization and has a presence in 60 countries worldwide.
ArcelorMittal continues to dig itself out of the severe problems caused by the Great Recession and the ongoing fiscal problems in Europe. ArcelorMittal reported fourth quarter results on Feb. 7, which revealed that the company lost $2.58 per share. The bottom line was hurt by hefty charges and challenging economic conditions in Europe where the demand for steel dropped 8.8% last year.
If investors believe the European economy can turn around and the company can get its act together, ArcelorMittal has some definite positives. The stock trades for a price-to-book value of only 0.5 and a dividend yield near 4%.
Freeport-McMoRan Copper & Gold (NYSE: FCX) has a $34 billion market value and engages in the exploration, mining, and production of mineral resources. The company primarily explores for copper, gold, and silver. However, the company had a bumpy ride in recent years as a result of volatile prices of gold and copper.
The stock traded at $60 at the beginning of 2011 and has steadily fallen to its current level of $35 per share. This could be an attractive entry point for many investors. Freeport-McMoRan appears to be attractively valued, as the stock holds a trailing price-to-earnings ratio of 11 and a forward P/E of 7.5, and also pays a dividend yielding nearly 3.5% at recent prices.
The Bottom Line
Investors may need a thick skin to enter the basic materials sector, as financial performance can vary due to swinging economic climates and volatile commodity prices. At the same time, the three companies mentioned above have the potential to provide investors the best of both worlds: market-beating capital gains as well as dividend returns, should the global economy continue its slow but gradual recovery. Therefore, investors looking to diversify into the basic materials sector would be wise to give these stocks further consideration.
Robert Ciura has no position in any stocks mentioned. The Motley Fool owns shares of ArcelorMittal and Freeport-McMoRan Copper & Gold. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!