Methanol, potash, wood, gold, and copper — they may seem unrelated at a glance, but these are five of the best materials to get invested in for capital gains, plus some tasty dividends.
West Fraser Timber (TSX:WFT)
Up 1.5% in the last five days at the time of writing, West Fraser Timber continues to impress with solid stats: from a strong track record typified by one- and five-year past earnings-growth rates of 35.9% and 29.5% to a past-year ROE of 28% signifying high quality, it’s a sturdy investment.
With debt levels within the “safety zone” at 26% of net worth, and considerable recent inside buying, West Fraser is attractively valued with a P/E of 6.2 times earnings and P/B of 1.6 times book. A projected drop in earnings of almost 30% counts this out as a growth investment, though investors bullish on forestry products may want to seize the value opportunity while it still presents itself.
One-year past earnings growth of 80% makes up for a negative five-year average past earnings-growth rate in this potentially undervalued stock. Selling at a 41% discount off its future cash flow value with a P/E of 8.2 times earnings, Methanex may not be for the risk averse: its level of debt compared to net worth has increased over the past five years from 62.7% to 91.6% today, though it’s well covered by operating cash flow.
Returns of 97% over the past year put Kirkland Lake Gold way ahead of the pack, while a one-year past earnings-growth rate of 74.1% and past-year ROE of 22% signify a high-performance ticker. A reduced level of debt, now sitting at just 1.8% of net worth, makes Kirkland Lake Gold the precious metal miner to stack shares in if flawless balance sheets are your thing.
Lundin Mining (TSX:LUN)
Arguably the healthiest miner to stack shares in if you’re interested in the likes of copper, nickel, and zinc, this popular TSX index ticker carries low debt at 0.3% of net worth, making for a lower-risk play, while a P/E of 21.5 times earnings and P/B of 1.1 times book show decent value. A dividend yield of 1.55% makes for a strong buy, especially when factored in with a 23.9% expected annual growth in earnings and a hungry acquisitions style.
Sometimes discounted as a stock with so-so balance sheet and some moderate potential for growth ahead of it, there is more to Nutrien than meets the eye. For starters, 21.3% returns on the year beat the Canadian chemicals industry for the same 12-month period, which itself returned 13.9%. Additionally, a decent P/B of 1.3 times book, handsome dividend yield of 3.18%, and significantly high 37% expected annual growth in earnings add up to a solid long-term investment.
The bottom line
From Methanex to a range of materials stocks, these tickers could reward with serious capital gains. West Fraser Timber pays a dividend yield of 1.19%, making for a solid buy if one can look past a negative earnings outlook, while Kirkland Lake Gold’s dividend yield of 0.38% matched with an 11.5% expected annual growth in earnings shows better prospects for growth.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Victoria Hetherington has no position in any of the stocks mentioned. Nutrien is a recommendation of Stock Advisor Canada.