When it comes to selecting a company to invest in, I like those that make a tangible product. Through patents, trademarks and other barriers, these companies can sometimes develop a formidable economic moat. Often times, the widest moats are found in the Basic Materials Sector.
The basic materials sector includes companies involved with the discovery, development and processing of raw materials. This includes companies engaged in the mining and refining of metals, chemical production and forestry products. All of which requires access to materials, or a large capital base to process it. Put another way, it takes time, money and access for new competitors to enter the market.
The downside to the basic materials sector is its reliance on a strong economy to create demand for its products; as such, the sector is highly cyclical. Since most of its products are considered to be commodities, the sector is sensitive to supply and demand fluctuations with end-users able to substitute based on price. Historically, yields in this sector have been on the lower end of the scale.
This week week, I screened my dividend growth stocks database for Basic Materials companies with a yield at or above 3.0% and that have increased their dividends for at least 20 consecutive years. The results are presented below:
MDU Resources Group Inc. (MDU)
Yield: 3.0% | Years of Dividend Growth: 22
MDU Resources Group Inc. is involved in electric and natural gas distribution, natural gas storage, gathering and transmission, construction materials and mining, and oil and natural gas production.
Air Products And Chemicals Inc. (APD)
Yield: 3.2% | Years of Dividend Growth: 30
Air Products and Chemicals Inc. is a major producer of industrial gases and electronics and specialty chemicals with interests in environmental and energy-related businesses.
RPM International Inc. (RPM)
Yield: 3.3% | Years of Dividend Growth: 39
RPM International Inc. makes specialty coatings and products for the structural waterproofing and corrosion control markets, as well as products for the consumer, do-it-yourself, and hobby markets.
Nucor Corporation (NUE)
Yield: 3.8% | Years of Dividend Growth: 39
Nucor Corporation is the largest minimill steelmaker in the U.S., and has one of the most diverse product lines of any steelmaker in the Americas.
Sonoco Products Co. (SON)
Yield: 4.0% | Years of Dividend Growth: 29
Sonoco Products Co. makes paper and plastic packaging products serving various industries and markets in more than 85 countries.
As with past screens, the data presented above is in its raw form. Some of the the companies would be disqualified for poor dividend fundamentals. However some of the others may be worth additional due diligence.
My database, D4L-Data, is an Open Office spreadsheet containing more than 20 columns of information on the 220+ companies that I track. The data is sortable and has built-in buttons and macros to make it easy to use. Companies included in the list are those that have had a history of dividend growth. The D4L-Data spreadsheet is a part of D4L-Premium Services and is updated each Saturday for subscribers.
Full Disclosure: Long NUE. See a list of all my dividend growth holdings here.