In this article, we will be looking at 10 Russell 2000 basic materials dividend stocks to buy. To skip our detailed analysis of the basic materials sector, you can go directly to see the 5 Russell 2000 Basic Materials Dividend Stocks to Buy.
The basic materials sector is one that is typically considered to be less exciting or gripping than others, like say the technology sector. However, it is a sector that can be considered among the winners of the market in 2021. There are a couple of reasons for this, most notably the fact that President Biden’s administration and its focus on a greener and more environmentally friendly America would lead to a greater focus on the production of green technology, and electric vehicles (EVs) in particular. How this may affect the basic materials sector is the next, and most natural question, and is easily answered when one considers that metals produced and refined by this sector, such as copper, lithium, and others, are among the few most vital elements required in the production of EVs and green electricity.
However, this is not the only reason why the materials sector can be expected to become a not-so-boring sector this year. Rather there are a number of factors contributing to the rising popularity of basic materials stocks like Rio Tinto Group (NYSE: RIO), Freeport-McMoRan Inc. (NYSE: FCX), LyondellBasell Industries N.V. (NYSE: LYB), and International Paper Company (NYSE: IP).
Before considering other factors, let’s look at the one mentioned above first. According to a Fidelity report on outlook for the basic materials sector in 2021, particularly in relation to the rising sales and production of EVs in the US and the growing demand for green electricity, we can see that there are positive prospects for the sector in the US. EV sales in the country are expected to rise by almost 12% between 2010 and 2050, to almost 2 million such vehicles being sold in the US alone. According to this report, as the EV market is reliant on batteries that in turn are dependent on lithium, cobalt, and nickel, it can be expected that companies involved in the production and handling of these metals within the materials sector are set to profit in the coming 2 decades. In fact, the Fidelity report has estimated that the rising demand for lithium and similar commodities has already risen so much that by the mid-2020s we may already be facing a supply crunch for these materials. On the same note, the report has estimated that by 2030, over 80% of the total demand for lithium is expected to come from the EV sector, with the metal seeing an eye-popping double-digit annual growth in its demand.
Apart from the above, a Stansberry Investor report from this July has also mentioned that the basic materials sector has, quite surprisingly for some, been able to jump by about 25% from January to May 2021. The gain has easily overtaken the return of the S&P 500 as well, being almost double the benchmark’s index’s return over the same timeframe. It has also been estimated that this sector in particular has managed to yield stable and positive returns at least since as far back as 2000, with a 7% annual return being quoted since then. This demonstrates not only a positive performance on part of this sector, to the joy of investors, but also a consistently positive performance, for the most part. Adding on to this is the fact that it has been reportedly stated by Bloomberg that the S&P 500 Materials Index has been able to perform well enough to earn it the title of the best sector on the market, just after the energy sector, as of this March. With shares soaring during the first few months of 2021 and commodity prices rising during the pandemic, the index went up by about 98%. In any case, the sector’s performance is increasingly becoming hard to doubt.
While the basic materials sector soars, the entire hedge fund industry is still feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and July 2021, our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Let’s now look at the 10 Russell 2000 basic materials dividend stocks.
Our Methodology
We have used Insider Monkey’s data of about 866 hedge funds alongside the Russell 2000 index to select small-cap basic materials dividend stocks that are more popular among hedge funds this year. The stocks also have mostly positive analysts’ ratings and robust fundamentals, demonstrating their financial strength. Finally, we have mentioned the dividend yields and the number of hedge fund holders for each stock as well, ranking them from the lowest to the highest dividend yield.
Russell 2000 Basic Materials Dividend Stocks
10. FutureFuel Corp. (NYSE: FF)
Number of Hedge Fund Holders: 9
Dividend Yield: 2.4%
FutureFuel Corp. (NYSE: FF) is a manufacturer and seller of diversified chemical, bio-based fuel, and bio-based specialty chemical products in the US. The company ranks 10th on our list of Russell 2000 basic materials dividend stocks and operates through its Chemicals and Biofuels segments.
In the second quarter of 2021, FutureFuel Corp. (NYSE: FF) had an EPS of $0.08. The company’s revenue of $ 74.12 million was up 56.3% year over year and beat the previous quarter’s revenue of $41.52 million.
By the end of the first quarter of 2021, 9 hedge funds out of the 866 tracked by Insider Monkey held stakes in FutureFuel Corp. (NYSE: FF) worth roughly $60.7 million. This is compared to 10 hedge funds in the previous quarter with a total stake value of approximately $54.4 million.
Like Rio Tinto Group (NYSE: RIO), Freeport-McMoRan Inc. (NYSE: FCX), LyondellBasell Industries N.V. (NYSE: LYB), and International Paper Company (NYSE: IP), FutureFuel Corp. (NYSE: FF) is a good stock to invest in.
9. Cabot Corporation (NYSE: CBT)
Number of Hedge Fund Holders: 23
Dividend Yield: 2.6%
Cabot Corporation (NYSE: CBT) is a specialty chemicals and performance materials company. It ranks 9th on our list of Russell 2000 basic materials dividend stocks and operates through its Reinforcement Materials, Performance Chemicals, and Purification Solutions segments.
This July, JPMorgan’s Jeffrey Zekauskas upgraded shares of Cabot Corporation (NYSE: CBT) from Neutral to Overweight. The analyst also has a $62 price target on the stock.
In the fiscal third quarter of 2021, Cabot Corporation (NYSE: CBT) had an EPS of $1.35, beating estimates by $0.17. The company’s revenue of $917 million was up 77.03% year over year and beat estimates by $112.30 million. Cabot Corporation (NYSE: CBT) has gained 10.69% in the past 6 months and 24.50% year to date.
By the end of the first quarter of 2021, 23 hedge funds out of the 866 tracked by Insider Monkey held stakes in Cabot Corporation (NYSE: CBT) worth roughly $111 million. This is compared to 20 hedge funds in the previous quarter with a total stake value of approximately $106 million.
Like Rio Tinto Group (NYSE: RIO), Freeport-McMoRan Inc. (NYSE: FCX), LyondellBasell Industries N.V. (NYSE: LYB), and International Paper Company (NYSE: IP), Cabot Corporation (NYSE: CBT) is a good stock to invest in.
8. Oil-Dri Corporation of America (NYSE: ODC)
Number of Hedge Fund Holders: 4
Dividend Yield: 2.9%
Oil-Dri Corporation of America (NYSE: ODC) is a developer of sorbent products in the US and globally. The company operates through its Retail and Wholesale Products Group and Business to Business Products Group segments. It ranks 8th on our list of Russell 2000 basic materials dividend stocks.
In the fiscal third quarter of 2021, Oil-Dri Corporation of America (NYSE: ODC) had an EPS of $0.30. The company’s revenue of $76.26 million was up 8.86% year over year and beat the previous quarter’s revenue of $74.50 million. Oil-Dri Corporation of America (NYSE: ODC) has gained 3.44% year to date and 0.92% in the past year.
By the end of the first quarter of 2021, 4 hedge funds out of the 866 tracked by Insider Monkey held stakes in Oil-Dri Corporation of America (NYSE: ODC) worth roughly $29.5 million. This is compared to 4 hedge funds in the previous quarter with a total stake value of approximately $30.6 million.
Like Rio Tinto Group (NYSE: RIO), Freeport-McMoRan Inc. (NYSE: FCX), LyondellBasell Industries N.V. (NYSE: LYB), and International Paper Company (NYSE: IP), Oil-Dri Corporation of America (NYSE: ODC) is a good stock to invest in.
7. SunCoke Energy, Inc. (NYSE: SXC)
Number of Hedge Fund Holders: 22
Dividend Yield: 3.2%
SunCoke Energy, Inc. (NYSE: SXC) is an independent producer of coke in the US and Brazil. The company ranks 7th on our list of Russell 2000 basic materials dividend stocks and operates through three segments, namely the Domestic Coke, Brazil Coke, and Logistics segments. It provides metallurgical and thermal coal alongside handling and mixing services to its steel, coke, electric utility, coal producing, and other related customers.
Lucas Pipes, an analyst at B. Riley, this July raised his price target on shares of SunCoke Energy, Inc. (NYSE: SXC) from $9 to $10. The analyst also reiterated a Buy rating on the shares.
In the second quarter of 2021, SunCoke Energy, Inc. (NYSE: SXC) had an EPS of -$0.11, missing estimates by $0.20. The company’s revenue of $364.30 million was up 7.78% year over year and beat estimates by $44.85 million. SunCoke Energy, Inc. (NYSE: SXC) has gained 18.21% in the past 6 months and 59.48% in the past year.
By the end of the first quarter of 2021, 22 hedge funds out of the 866 tracked by Insider Monkey held stakes in SunCoke Energy, Inc. (NYSE: SXC) worth roughly $87 million. This is compared to 19 hedge funds in the previous quarter with a total stake value of approximately $66 million.
Like Rio Tinto Group (NYSE: RIO), Freeport-McMoRan Inc. (NYSE: FCX), LyondellBasell Industries N.V. (NYSE: LYB), and International Paper Company (NYSE: IP), SunCoke Energy, Inc. (NYSE: SXC) is a good stock to invest in.
6. Glatfelter Corporation (NYSE: GLT)
Number of Hedge Fund Holders: 8
Dividend Yield: 3.4%
Glatfelter Corporation (NYSE: GLT) is a manufacturer of engineered materials for sale across the globe. The company has two segments, Composite Fibers, and Airlaid Materials. It ranks 6th on our list of Russell 2000 basic materials dividend stocks.
BMO Capital just this July upgraded shares of Glatfelter Corporation (NYSE: GLT) from Market Perform to Outperform. Analyst Mark Wilde, who pushed the upgrade, also holds an unchanged $17 price target on Glatfelter Corporation (NYSE: GLT) shares.
In the second quarter of 2021, Glatfelter Corporation (NYSE: GLT) had an EPS of $0.18, beating estimates by $0.04. The company’s revenue of $244.91 million was up 13.29% year over year and beat estimates by $2.91 million.
By the end of the first quarter of 2021, 8 hedge funds out of the 866 tracked by Insider Monkey held stakes in Glatfelter Corporation (NYSE: GLT) worth roughly $30.7 million. This is compared to 7 hedge funds in the previous quarter with a total stake value of approximately $21.6 million.
Like Rio Tinto Group (NYSE: RIO), Freeport-McMoRan Inc. (NYSE: FCX), LyondellBasell Industries N.V. (NYSE: LYB), and International Paper Company (NYSE: IP), Glatfelter Corporation (NYSE: GLT) is a good stock to invest in.
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Disclosure: None. 10 Russell 2000 Basic Materials Dividend Stocks to Buy is originally published on Insider Monkey.
