By Jared Cummans
Income investors often feel that commodities are not sound investments for their portfolio as something like a futures contract on gold offers no yield. But there are plenty of other ways to make a play on commodities while adding the safety net of dividend yield. Some turn to stocks while others are more partial to the security that index funds offer, namely, exchange traded products. ETFs offer investors immediate diversification through a single ticker while holding onto added benefits of intraday liquidity, transparency, and some favorable tax treatments. A number of ETFs that choose to focus on commodities come with handsome yields attached. Below, we outline the highest yielding commodity products [see also 12 High-Yielding Commodities For 2012].
Copper Miners ETF (NYSEARCA:COPX) – 3.72%
This fund is designed to reflect the performance of the copper mining industry. As would be expected, top holdings of COPX include heavy hitters like Freeport-McMoRan (NYSE:FCX) and Southern Copper (NYSE:SCCO). Overall, the fund holds just over 30 mining companies with the overwhelming majority being based outside of U.S. borders. From a country perspective, COPX is highly representative of both Canada and the U.K., though it should be noted that many miners are based in one country, but do the majority of their business in another. COPX has a current yield of 3.72% as well as a return of over 17% in 2012 [see also Three Commodities Dividend Lovers Must Own].
Dow Jones Emerging Markets Metals & Mining Titans Index Fund (NYSEARCA:EMT) – 3.77%
EMT seeks to replicate an index that focuses on the largest publicly traded mining companies involved in industrial and precious metals exploration, extraction and production within the emerging world. The fund is rather small, with only $14.7 million in assets, which may turn some investors away from its exposure. Despite being an emerging market fund, the majority of EMT’s holdings are large-cap firms who are based in various nations like South Africa, Brazil, and China, among many others. This ETF will come with the added risk that all emerging markets exhibit, but that also makes it a candidate for explosive growth, another attribute of emerging markets. Overall, the fund pays out a current yield of 3.77% and has jumped over 20% on the year [see also Dividend Special: Top Companies In Every Major Commodity Sector].
Market Vectors Junior Gold Miners ETF (NYSEARCA:GDXJ) – 4.20%
GDXJ is an investor favorite, as its targeted exposure aims to allocate to small- and mid-cap gold miners. Note that the underlying index requires that a company make only 50% of its revenue from gold and or silver mining, meaning that this ETF is certainly not a pure play on gold. That being said, GDXJ has well over $2.3 billion in assets with an average daily volume topping 2.7 million, making it one of the more popular commodity funds in the exchange traded world. The fund is home to over 80 individual holdings and dedicates just 27% of its assets to the top 10, meaning that it has a strong diversity that investors strive for in an ETF. On top of all of that GDXJ pays out a handsome dividend of approximately 4.2%.
Market Vectors Rare Earth/Strategic Metals ETF (NYSEARCA:REMX) – 5.39%
REMX is a one-of-a-kind product that gives investors a means of tracking the overall performance of publicly traded companies primarily engaged in a variety of activities that are related to the mining, refining and manufacturing of rare earth/strategic metals. One of the first things that investors will note about the fund is that it is comprised mainly of small- and mid-cap companies, meaning that it will likely be more volatile than general markets. That being said, small- and mid-cap companies also present strong growth opportunities, giving the fund potential to appreciate greatly in a bull market. REMX is certainly one of the most attractive commodity products with its yield of 5.39% and a strategy that can be found in very few places in the investing world.
Disclosure: No positions at time of writing.