Investors’ concerns over several lingering issues, which have fostered considerable stock market volatility since the beginning of the year, are growing with the Fed’s plans to raise interest rates aggressively and along with intensifying geopolitical tensions. The possibility of the economy suffering a recession is also keeping investors up at night.
However, many analysts expect the sell-off to be over soon because the market is already oversold. On Tuesday, CNBC’s Jim Cramer said that the market would likely move sideways instead of experiencing a monster rally when it recovers.
Given the possibility of heightened volatility in the near term, we believe fundamentally sound stocks Rio Tinto Group (RIO), Westlake Chemical Partners LP (WLKP), and Alliance Resource Partners, L.P. (ARLP), which each offer dividend yields of more than 5%, could be solid additions to one’s portfolio to ensure a steady income stream.
Rio Tinto Group (RIO)
Headquartered in London, RIO is a mining and metals company that explores for, mines, and processing mineral resources worldwide. Its segments include Iron Ore; Aluminum; Copper; and Minerals.
On March 29, 2022, RIO completed the acquisition of the Rincon lithium project, a large undeveloped lithium brine project in Argentina, for $825 million. The project is a long-life, scalable resource capable of producing battery-grade lithium carbonate with the lowest carbon footprints in the industry. This is expected to help RIO improve its battery materials business and meet the growing demand for lithium, thus being strategically beneficial for the company.
Also in March, RIO made a non-binding proposal to the Turquoise Hill Board to acquire approximately 49% of its issued and outstanding shares. The proposed transaction would help RIO directly work with Mongolia’s government and move the Oyu Tolgoi project forward by enhancing its ownership structure. This should strengthen RIO’s copper portfolio and reinforce its long-term commitment to Mongolia.
The company’s $8.34 annual dividend yields 11.6% at its current share price. It paid its semi-annual dividend of $4.17 on April 21, 2022. Its dividend payouts have increased at a 37.2% CAGR over the past three years and 36% over the past five years. The company has a record of five consecutive years of dividend growth.
RIO’s consolidated sales revenue increased 42.3% year-over-year to $63.50 billion in its fiscal year ended Dec. 31, 2021. Its operating profit grew 77.2% from its year-ago value to $29.82 billion. Its net earnings attributable to RIO increased 115.9% year-over-year to $21.09 billion. Also, its EPS came in at 1,295 cents, up 115.9% from the prior year.
RIO has gained 11.8% in price over the past six months and 7.7% year-to-date to close the last trading session at $71.51.
RIO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which translates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
RIO also has an A grade in Quality and a B in Value. It is ranked #5 of 37 stocks in the Industrial – Metals industry.
Beyond what is stated above, we have also rated RIO for Momentum, Stability, Sentiment, and Growth. Get all the RIO ratings here.
Westlake Chemical Partners LP (WLKP)
WLKP acquires, develops, and operates ethylene production facilities and related assets in the United States. It also sells ethylene co-products directly to third parties on a spot or contract basis. WLKP is headquartered in Houston, Tex.
The company’s $1.89 annual dividend yields 7.06% at its current share price. It declared its last quarterly dividend of $0.47 on Jan. 24, 2022. Its dividend payouts have increased at a 4.3% CAGR over the past three years and 7.3% over the past five years.
WLKP’s total net sales increased 34.5% from the prior-year quarter to $330.46 million in the fiscal fourth quarter, ended Dec. 31, 2021. Its gross profit for the quarter came in at $147.05 million, reflecting a 73.2% increase year-over-year, while its income from operations stood at $140.77 million, up 81.4% year-over-year. Its net income per share was $0.84, reflecting an increase of 95.3% from the prior-year quarter.
The $0.57 consensus EPS estimate for its fiscal first quarter ended March 31, 2022, represents a 33.4% improvement year-over-year. The $354 million consensus revenue estimate for the same quarter represents a 32% increase from the same period last year.
WLKP stock has gained 6.2% in price over the past six months and 1.6% year-to-date to close the last trading session at $27.28.
It is no surprise that WLKP has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock also has an A grade in Quality and a B in Growth, Value, Stability, and Sentiment. Among the 11 stocks in A-rated MLPs – Other industry, WLKP is ranked #1.
In addition to the POWR Rating grades I have just highlighted, one can see the WLKP’s ratings for Momentum here.
Alliance Resource Partners, L.P. (ARLP)
ARLP, a diversified natural resource company, produces and markets coal primarily to utilities and industrial users in the United States. The Tulsa, Okla., company operates through four segments: Illinois Basin Coal Operations; Appalachia Coal Operations; Oil & Gas Royalties; and Coal Royalties.
ARLP’s $0.65 annual dividend yields 7.71% at its current share price. On April 26, 2022, the company announced a $0.35 quarterly dividend, payable on May 13. The declared distribution represents a 250% increase from the last dividend paid for the quarter ended March 31, 2021.
For its fiscal fourth quarter, ended Dec. 31, 2021, ARLP’s total revenues increased 29.2% year-over-year to $473.47 million. Its income from operations grew 34.1% from the year-ago value to $61.14 million. Its net income attributable to ARLP stood at $51.83 million for the quarter, reflecting a 48% increase year-over-year, while its EPS was $0.40, up 48.1% year-over-year.
Analysts expect ARLP’s revenue for its fiscal quarter ended March 31, 2022, to come in at $484.63 million, indicating a 52.1% increase year-over-year. Also, the company’s EPS is expected to grow 215.8% year-over-year to $0.60 in the same period.
ARLP’s shares have gained 213.6% in price over the past year to close the last trading session at $18.50. The stock has gained 46.4% in price year-to-date.
ARLP’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to Strong Buy in our POWR Ratings system.
ARLP also has an A grade in Momentum and Quality and a B in Sentiment. The stock is ranked #3 in the MLPs – Other industry. To get ARLP’s ratings for Growth, Value, and Stability, click here.
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RIO shares rose $1.58 (+2.21%) in premarket trading Friday. Year-to-date, RIO has gained 16.35%, versus a -10.56% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities. More...
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