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Investing in Commodities, Tip 2: Commodities and Dividends Can Align


There are a number of indirect plays on the commodity world that offer dividend yields.

Recent years have seen record low interest rates and investors starved for strong yields. As such, many have turned to the comfort of dividend-yielding securities to maintain a steady stream of income for their portfolios. While this method has generally been effective, it has caused investors to overlook some vital asset classes, like commodities. When most investors think of commodities, they think of futures contracts or ETFs that track said futures; nowhere in their mind is a dividend yield. But there are a number of more indirect plays on the commodity world that offer dividend yields that should not be overlooked.

To find these yields, investors and advisors will have to look to the equity side of the equation. This will typically involve miners or producers of commodities who still have heavy ties to the underlying asset, but are not necessarily a direct play on it. A great example comes from the Junior Gold Miners ETF (GDXJ). This fund tracks a basket of small cap gold miners to allow investors to make an equity spin on this precious metal. But GDXJ also has another draw: Its dividend yield is just north of 5%, allowing it to amass more than $2 billion in total assets.

The takeaway here is that investors searching for yield can still add the vital exposure of commodities to their portfolio, it simply requires a bit more research to find the securities that are a good fit for each portfolio.

Bottom Line: Commodity investments can still offer yield, you just have to look for them.

This article is part of the series "Tips for Investing in Commodities." See also:

Tip 1: Futures Do Not Equal Spot

Tip 3: Watch Your Tax Rates

Tip 4: China Can Make or Break You

Tip 5: Low Inventories Can Lead to Backwardation

Tip 6: Diversification Is Not a Given

Tip 7: Rolling Front Month Futures Is a Recipe for Disaster

Tip 8: More Than Just Energy and Gold

Tip 9: Watch Out for That K-1!

Tip 10: Consider Expenses Always

Tip 11: Commodity Exposure Through Stocks: Pros & Cons

Tip 12: Know What You're Getting Into

Tip 13: Consider Physical Exposure

Tip 14: Commodity ETFs: Structure Matters

Tip 15: Bigger Does Not Mean Better

Tip 16: Commodity ETFs Get a Bad Rap

Tip 17: Beware the Dollar's Impact

Tip 18: Not All Commodities Are Created Equal

Tip 19: Know Your Geography

Tip 20: Be Mindful of Your Timing

Tip 21: Platinum and Palladium Are the Other Precious Metals

Tip 22: Consider the COT Report

Tip 23: Remember That You Also Have Options

Tip 24: NAGS Vs. UNG -- Different Tools for Different Objectives

Tip 25: Free Resources Can Make Your Life Easier

Follow us on Twitter @CommodityHQ!

Editor's note: This article by Jared Cummans was originally published on Commodity HQ.
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