3 Top Commodity Stocks TFSA Investors Can Buy Right Now

Commodity stocks such as Albemarle and Barrick Gold may provide investors an opportunity to deliver outsized gains in the next year.

| More on:
Nickel ore is mined from the ground.

Source: Getty Images

Global trade is strained by supply chain disruptions and geopolitical tensions. Amid the supply shortages, prices of several commodities, including oil, natural gas, and basic metals are rising in 2022. Several commodity stocks, especially in the energy sector, are climbing at a rapid pace in 2022, driving share prices higher.

So where should you invest when facing a high pricing environment and macroeconomic headwinds? I have identified three commodity stocks investors can buy right now.

Albemarle Corp.

A few companies are becoming vital cogs in the supply chain for electric vehicles (EVs). However, most of them are unprofitable, making them high-risk bets in an uncertain environment.

But Albemarle (NYSE:ALB), a U.S.-based company, is profitable and even pays investors a dividend, making it a top EV stock to own right now. It is among the world’s largest producers of lithium, which is a key component required to manufacture EV batteries.

Lithium accounts for 60% of total sales for Albemarle, and a significant portion of the commodity it produces is used to manufacture EVs.

In Q2 2022, Albemarle almost doubled its sales while adjusted earnings surged 288% year over year. Due to its stellar performance, the stock has surged 22% in the last year and is up close to 500% since September 2012. Albemarle also pays investors a dividend of US$1.58 per share, indicating a dividend yield of 0.6%.

Despite its outsized gains, the stock is trading at a discount of more than 10% compared to consensus price target estimates.

Freehold Royalties

One of the leading royalty oil and gas companies in Canada, Freehold Royalties (TSX:FRU) holds over six million gross acres of land. It drives oil and gas development on its land via lease-out programs. Freehold acquires quality assets that have a long economic life and acceptable risk profiles, allowing it to generate gross overriding royalties for top-line growth.

Driven by its asset-light model and rising oil prices, Freehold Royalties is forecast to increase its adjusted earnings to $1.38 per share in 2022, up from $0.53 per share in 2021.

The company also pays investors a tasty forward yield of 8%, given annual dividends of $1.08 per share. Freehold manages its debt prudently and aims to keep its net debt to funds from operations ratio below 1.5. The energy royalty is targeting a dividend payout ratio of between 60% and 80%.

Barrick Gold

The final commodity stock on my list is one of the largest gold miners in the world, Barrick Gold (TSX:ABX)(NYSE:GOLD). With the largest portfolio of tier-one assets, Barrick Gold offers investors an opportunity to diversify their holdings.

In Q2 2022, Barrick Gold produced 1 million ounces of the yellow metal while copper production stood at 120 million pounds. On strong production results, the company reported an increase in operating cash flow of 45% to US$924 million and free cash flow of xx% to US$169 million.

Net earnings stood at US$0.27 per share while it paid investors a quarterly dividend of US$0.20 per share. Given annual dividends of US$0.80 per share, Barrick Gold’s dividend yield stands at 5.5%.

Analysts tracking the stock expect shares to more than double in the next year, making Barrick Gold a top bet right now.

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 Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool recommends FREEHOLD ROYALTIES LTD. The Motley Fool has a disclosure policy.

More on Energy Stocks

Dice engraved with the words buy and sell
Energy Stocks

Enbridge Stock: Buy, Sell, or Hold in July 2024?

While there might be reasons to sell it, there might be good reasons to hold onto or even buy more…

Read more »

Question marks in a pile
Energy Stocks

What’s Going on With Brookfield Renewable Stock?

BEP stock (TSX:BEP.UN) has been stagnating in share price, but there are still many catalysts that should drive the price…

Read more »

oil and gas pipeline
Energy Stocks

A Dividend Giant I’d Buy Over Enbridge Stock Right Now

Sure, Enbridge (TSX:ENB) stock used to be a dividend giant, but I fear that's no longer the case. Yet this…

Read more »

Nuclear power station cooling tower
Energy Stocks

Should Investors Buy the Dip in Cameco Stock?

Cameco (TSX:CCO) stock recently experienced a slight dip, and with earnings around the corner, it might be time to pick…

Read more »

oil and gas pipeline
Energy Stocks

Pipeline to Prosperity: Invest in Enbridge and Pembina Stock

Here's why pipeline companies such as Enbridge and Pembina should be on the shopping list of income investors in July…

Read more »

Oil industry worker works in oilfield
Energy Stocks

If You Invested $1,000 in Headwater Exploration Stock 5 Years Ago, This Is How Much You’d Have Now

Here's why Headwater Exploration (TSX:HWX) stock has been an active investor's dream come true over the past half decade

Read more »

consider the options
Energy Stocks

Gold Stocks vs. Oil Stocks: Where to Invest for the Rest of 2024

Investing in oil and gold stocks can be tricky for the average investor given the cyclicality of these commodities.

Read more »

Silhouette of bull in front of setting sun
Energy Stocks

Here’s the Bull Case Behind Why Suncor Could Surge From Here

Let's dive into the bull case behind Suncor (TSX:SU), and where this Canadian energy giant could be headed into 2025.

Read more »