Despite their potentially high growth potential, there are also a handful of quality lithium stocks that pay dividends. Buying these companies may be an effective way for some investors to maximize their total return, via share price appreciation as well as annual dividends.
It’s clear that the clean energy transformation has just gotten started. Governments are far behind in their goals to reduce emissions and electric vehicles are gaining popularity. This means that there’s still plenty of upside potential for investors to benefit from owning lithium stocks that pay dividends. Furthermore, due to the potentially explosive return profile of these companies, one can feel secure that the income they receive from these companies doesn’t detract an undue amount from their overall potential.
So if you are after lithium stocks that pay dividends, then continue reading. Here are the best companies you should consider adding to your portfolio.
Albemarle Corporation (ALB)
Albemarle Corporation (NYSE:ALB) is a global leader in lithium production, a key component in electric vehicle batteries. With the growing demand for electric vehicles and renewable energy storage, Albemarle’s position in the lithium market could offer long-term growth potential.
Investors are eyeing ALB stock as a potential standout this earnings season. The company is experiencing favorable earnings estimate revisions, often a sign of an upcoming earnings beat. Its EPS estimate for the current quarter is $4.28 per share The brand’s dividend yield is 0.69%, but it should be noted that it’s very well-covered by its free cash flow. The company’s payout ratio is only 4%, which suggests that not only is the dividend sustainable but it has enough runway to grow it in the future.
There’s also good reason to suggest that ALB stock may trade at undervalued levels. Its P/E is 5.54 while on a forward basis, this is slightly higher at 7.92. The stock is down 34.64% throughout the past year.
Chemical & Mining Co. of Chile (SQM)
Chemical & Mining Co. of Chile (NYSE:SQM) is a diversified chemical company with significant exposure to the lithium industry. The company’s higher dividend yield could appeal to income-focused investors, which is 3.94% SQM’s operations in Chile, a country rich in lithium resources, provide a strategic advantage in accessing raw materials.
In Q1 2023, the company saw a 12% increase in revenue to $2.26 billion but fell short of Wall Street’s expectations, with earnings per share dropping 6%. Despite a 15% decrease in lithium sales volume, the company’s management remains optimistic, expecting a recovery and projecting a 20% growth in lithium sales volume for the year.
Furthermore, there are plenty of things to like about the company’s fundamentals. Its margins are strong and improving, with a healthy net profit margin of 35.20% at the time of writing. Now might also be a good time to pick up shares, as they trade close to oversold levels on the Relative Strength Index, and momentum is turning to the upside on the daily chart for other oscillators.
FMC Corporation (FMC)
FMC Corporation (NYSE:FMC) is a diversified chemical company with a presence in the lithium sector. Its higher dividend yield compared to others in the industry may attract income investors, which is 2.22% FMC’s wide-ranging portfolio, including agricultural, industrial and consumer segments, may provide resilience against sector-specific downturns.
FMC stock is another one of my contrarian picks for lithium stocks that pay dividends. The brand’s share fell to a 21-month low, dropping 11.3% after slashing its Q2 and full-year guidance, citing a 30% reduction in expected volumes due to a significant reduction in inventory by channel partners. Despite the unexpected large cut in guidance, the company noted that “on-the-ground consumption” remains strong, and its input-inflation outlook continues to improve.
If investors always chase companies that have strong capital appreciation month-to-month and year-to-year, the end result is that they are buying high and hoping to sell higher later. Investing in companies that show a marginal amount of weakness allows investors to stick to the common sense approach of buying shares while they’re cheap. If the weaknesses are not systemic to the company, then much of the discount can be chalked up to investors running in fear.
Buying a stock while it’s low is not without its risks. However, if the market, in the end, is a weighing machine that fairly values companies on their intrinsic value throughout the long run, then the shares of these companies could be set for a steep recovery.
On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
