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3 Commodity Stocks With Huge Dividends

Just be prepared to watch the dividend whip around a bit

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VALEVale (NYSE:VALE) is a Brazil stock that focuses on basic metals like iron, copper and aluminum, as well as some agricultural chemicals and gold mining. I recently wrote a whole story on why Vale stock is a buy due to strong fundamentals and a good outlook, but I barely even covered the high-yield dividend potential of this pick!

And if you don’t want to read my full opinion on why Vale stock is a buy, just consider these quick facts: First-quarter revenue in fiscal 2011 almost doubled for Vale, from just shy of $7 billion to $13.8 billion. Second-quarter revenue was up “only” 50%, from $10.3 billion to $15.7 billion.

We covered the copper picture with SCCO. But the aluminum price trends also are hot, doubling the lows seen in the recession. And hopefully I don’t have to tell you how impressive gold has been during the past few years.

This commodity stock also is a dividend payer of note. Based on its last quarterly payment of 37 cents per share, Vale has an annualized yield of 5.8%. Of course, that dividend is volatile — ranging from 19 cents to as much as 58 cents in the past few quarters. The dividend also can be unreliable, since Vale only paid two dividend payments for all of 2010.

However, the impressive growth ahead of this company in both earnings per share and revenue implies that future payouts will be frequent and robust. Vale’s dividend could be less than 37 cents a share in December — but it also could be significantly more than that.

Companhia Siderurgica Nacional

SIDCompanhia Siderurgica Nacional (NYSE:SID) is another hot emerging-market metals stock. SID is a great way to play the commodities boom and a great way to tap into big dividends.

Revenue definitely is on the upswing, with seven consecutive quarters of year-over-year sales growth. Companhia Siderurgica Nacional has seen revenue go from $5.5 billion in fiscal 2009 to $8.2 billion in 2010 to projections well over $10 billion this year. Earnings per share also have steadily increased, from 90 cents in 2009 to 98 cents in 2010 to projections of more than $1.50 this year.

The tricky thing about SID stock, however, is its volatile annual dividend. Unlike other quarterly dividend payers, the dividends from this stock come once every 12 months — and that payout can fluctuate significantly. Based on the 81 cents paid earlier in 2011, investors can expect a yield of about 8.5% in the spring. But again, that’s just an assumption.

After all, when the company seemed to be recovering nicely in 2010 with stronger sales and a firm share prices, the dividend was much less impressive. There really are no guarantees with SID’s dividend.

However, the growth of the company is an encouraging sign. Also, the ex-dividend date typically is in the spring, so there’s plenty of reason to bide your time and wait to see if the market or the broader economic picture changes the fortune of this steelmaker.

But remember that the 8.5% yield is not only based on that projected dividend but the current cost. If SID shares march up significantly, the yield will naturally decrease in kind.

Jeff Reeves is the editor of Write him at, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook. As of this writing, he did not own a position in any of the aforementioned stocks.

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