You might have heard chatter about the coming "commodities supercycle," but not all minerals will necessarily take moon shots in the 2020s. Besides, trading commodities via the futures market can be complicated, risky, and expensive.
But there is one metal that's not "precious" like gold or silver, although it is extremely useful and its demand is likely to outweigh the supply. The next stock I'm going to buy, therefore, allows investors to sidestep the complexities of futures trading while still gaining exposure to a high-demand raw material along with decent quarterly dividends.
Put the pedal to this metal
Some folks have called silver the ultimate industrial metal, but copper really deserves that title due to its ultra-high conductivity and broad range of applications. Copper might not be pretty like gold and silver, but it's needed for electrical wiring and other infrastructure applications, as well as green energy uses in electric vehicles and solar panels. The reopening of China's economy this year is bound to increase demand for this crucially important metal.
The International Copper Association (which admittedly has a vested interest here) estimates that global copper demand will double from 2020 levels to 50 million metric tons by 2050. Yet, investors might not have to wait decades to benefit from the demand ramp-up. Citing copper's demand-supply imbalance, Jonathan Barratt, CEO of risk management firm CelsiusPro, says that his outlook for 2023 and 2024 is, "When you get a dip in copper prices, it's something to have in your portfolio."
Robin Griffin, vice president for metals and mining at energy consultancy Wood Mackenzie, points to political unrest in Peru as he forecasts "major deficits in copper to 2030." Some experts have called for copper to reach new heights during the next year -- Goldman Sachs sees a price of $10,500 per metric ton (it's about $8,000 now), while Trafigura envisions $12,000 or more. But regardless of the prognostications, it's highly likely that the imbalance between supply and demand will push the price higher sooner or later.
One way to play the metal boom
Futures don't offer dividends, and they don't necessarily belong in retirement accounts, but some stocks do. If you're ready to seize the opportunity in copper, you might consider Freeport-McMoRan (FCX 1.52%), an American miner with operations on multiple continents and a strong focus on copper.
How much copper? In terms of estimated recoverable proven and probable copper reserves, Freeport-McMoRan recently reported 48.6 billion pounds in North America, 31.7 billion pounds in South America, and 30.8 billion pounds in Indonesia.
The company produced 4.21 billion recoverable pounds of copper in 2022, compared to 3.84 billion in 2021.Freeport-McMoRan also produced some gold and molybdenum, but not nearly as much as the company's copper output; in other words, the stock is really a pure play on copper.
NYSE: FCX
Key Data Points
On the financial side of the equation, the harsh truth is that some publicly listed mining companies only have hopes of turning a profit someday. Freeport-McMoRan, in contrast, has been consistently profitable since mid-2020 -- not a small feat as COVID-19 forced many companies' mining operations to shut down in 2020.
Plus, if you're a yield seeker, like I am, Freeport-McMoRan is a prime pick. The company has managed to avoid cutting its dividend despite COVID's impact a few years ago and inflation/recession concerns more recently. The 1.45% dividend yield is a nice bonus for long-term shareholders, and it's a continuation of the company's dedication to rewarding investors. Between dividend payouts and share repurchases, Freeport-McMoRan returned $2.2 billion of value to shareholders in 2022.
Granted, there are other ways to gain copper exposure, and Freeport-McMoRan isn't the only company trying to get copper out of the ground. Still, its robust production, intense focus on copper, and reliable dividend distributions put this minerals-market powerhouse at the top of my list of stocks I'm preparing to buy right now.
