The Russia-Ukraine war has been exacerbating supply chain disruptions. This, along with the resurgence of COVID-19 cases in several countries, could mar the basic materials industry’s growth this year. However, since economists do not expect the economy's health to deteriorate, the industry should be able to maintain its growth even if at a slower pace than it achieved last year.
Furthermore, supportive federal policies, some of which will be funded by last year’s infrastructure spending bill, should drive the industry's growth in the coming months. Investors’ interest in this space is evident in the Materials Select Sector SPDR Fund’s (XLB) 8.5% returns over the past month compared to the SPDR S&P 500 Trust ETF’s (SPY) 5.2% returns.
Therefore, considering current market volatility, we think it could be wise to bet on fundamentally sound basic materials stocks Rio Tinto Group (RIO), Anglo American plc (NGLOY), Kronos Worldwide, Inc. (KRO), and CVR Partners, LP (UAN), which offer high dividend yields.
Rio Tinto Group (RIO)
Headquartered in London, RIO explores, mines, and processes mineral resources worldwide. It offers aluminum, copper, diamonds, gold, borates, titanium dioxide, salt, iron ore, and uranium.
On February 23, 2022, RIO’s CEO, Jakob Stausholm, said, “The recovery of the global economy, driven by industrial production, resulted in significant price strength for our major commodities, which we were able to capture, achieving record financial results with free cash flow of $17.7 billion and underlying earnings of $21.4 billion, after taxes and government royalties of $13.0 billion.”
RIO’s dividend payouts have grown at a 36% CAGR over the past five years. Its current dividend yield is 10.71%, while its four-year average yield is 9.04%. Its total dividend per share came in at $1.04 for the year ended Dec. 31, 2021, up 86.7% year-over-year.
RIO’s consolidated sales revenue was $63.49 billion for the year ended Dec. 31, 2021, up 42.3% year-over-year. Its operating profit came in at $29.82 billion, up 77.2% year-over-year, while its EPS was 1,295.00 cents, up 115.9% year-over-year.
Over the past three months, the stock has gained 19.2% in price to close yesterday’s trading session at $78.30.
RIO’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to a Strong Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
It has a B grade for Value and Quality. It is ranked #4 of 37 stocks in the Industrial - Metals industry. Click here to see the additional ratings for RIO (Growth, Momentum, Stability, and Sentiment).
Click here to check out our Gold and Silver Industry Report for 2022
Anglo American plc (NGLOY)
Headquartered in London, NGLOY operates as a mining company worldwide. The company explores rough and polished diamonds, copper, platinum group metals, etc.
On Feb. 24, 2022, NGLOY’s CEO, Mark Cutifani, said, “In a year of two distinct halves, we recorded strong demand and prices for many products as economies recouped lost ground, spurred by government stimulus.”
NGLOY’s dividend payouts have grown at a 42.4% CAGR over the past three years. Its four-year average yield is 4.70%, while its current yield is 5.54%. On Feb. 24, 2022, NGLOY declared a $1.18 per share final dividend, consistent with its 40% payout policy, and a $0.50 per share special dividend.
For the year ended Dec. 31, 2021, NGLOY’s revenue came in at $41.55 billion, up 63.3% year-over-year. Its profit was $8.56 billion, up 309.9% year-over-year. Also, its EPS came in at $6.93, up 310.1% year-over-year.
Over the past three months, the stock has gained 31.3% in price to close yesterday’s trading session at $26.30.
NGLOY has an overall B rating, which equates to a Buy in our POWR Ratings system.
Also, the stock has an A grade for Value and a B grade for Stability and Quality. Within the Industrial - Metals industry, it is ranked #7. Click here to see the additional POWR Ratings for Growth, Momentum, and Sentiment for NGLOY.
Click here to check out our Gold and Silver Industry Report for 2022
Kronos Worldwide, Inc. (KRO)
KRO in Dallas, Tex., produces and markets titanium dioxide pigments in Europe, North America, the Asia Pacific, and internationally. It is also a major international producer of titanium dioxide products.
KRO’s dividend has grown at a 4% CAGR over the past five years. Its four-year average yield is 5.19%, while its current yield is 4.67%. On Feb. 23, 2022, KRO announced a $0.01 per share increase in its regular quarterly dividend.
KRO’s net sales increased 19.5% year-over-year to $496 million in the fourth quarter, ended Dec. 31, 2021. Its net income was $31.60 million, up 209.8% year-over-year. And its EPS came in at $0.28, up 211.1% year-over-year.
Analysts expect KRO’s revenue to increase 8.6% year-over-year to $2.11 billion in its fiscal year 2022. The company’s EPS is estimated to increase 28.1% per annum over the next five years. Over the past three months, the stock has gained 10.9% in price to close yesterday’s trading session at $16.28.
It is no surprise that KRO has an overall A rating, which equates to a Strong Buy in our proprietary rating system. In addition, it has a B grade for Value, Stability, Sentiment, and Quality.
KRO is ranked #3 of 89 stocks in the A-rated Chemicals industry. Click here to see KRO’s Growth and Momentum ratings.
CVR Partners, LP (UAN)
UAN is a Sugar Land, Tex.-based limited partnership that is focused on producing, marketing, and distributing nitrogen fertilizer products. Together with its subsidiaries, the company produces and sells nitrogen fertilizer products in the United States.
On Feb. 22, 2022, Mark Pytosh, CEO of UAN’s general partner, said, “Product pricing continued to strengthen into the fourth quarter of 2021, and we expect the momentum to continue into the spring 2022 planting season. With grain prices near multi-year highs and crop inventory levels near multi-year lows, farmer economics remain very attractive.”
UAN’s dividend payouts have grown at a 6.9% CAGR over the past five years. Its four-year average yield is 6.05%, while its current yield is 14.20%. On Feb. 22, 2022, UAN declared a fourth-quarter 2021 cash distribution of $5.24 per standard unit.
UAN’s net sales came in at $188.92 million for the fourth quarter, ended Dec. 31, 2021, up 109.2% year-over-year. Its net income came in at $61.49 million, compared to a$16.88 million loss in the previous period. In addition, its EPS came in at $5.76, compared to a $1.53 loss per share in the prior-year period.
UAN’s EPS is estimated to increase 8% per annum over the next five years. Over the past three months, the stock has gained 85% in price to close yesterday’s trading session at $147.59.
UAN has an overall B grade, which equates to a Buy in our POWR Ratings system. It has an A grade for Growth and a B grade for Quality. It is ranked #5 of 11 stocks in the A-rated MLPs - Other industry. Click here to see additional ratings for Value, Momentum, Stability, and Sentiment for UAN.
RIO shares were trading at $79.52 per share on Friday afternoon, up $1.22 (+1.56%). Year-to-date, RIO has gained 26.59%, versus a -4.40% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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