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Time to Buy These 3 Commodities

With the stock back at $23, it looks like the light is flashing green again.

This is because industry watchers have set their 2012 price targets for the underlying spot market for silver in 2012, and the outlook is good. A survey of 11 silver analysts by Bloomberg predicts silver will rebound to $42 an ounce in the first quarter of 2012, up from a current $32. The most bearish of the analysts surveyed sees silver falling from its current price around $30 to about $27, so the current price isn't far from that view.

Assume silver stays put at just $30 an ounce in 2012. In that event, UBS' analysts figure Couer D'Alene could offer up a solid dividend in 2012 -- yielding 7% at current prices, which assumes a 50% payout ratio). As I noted back in January, the miner has completed the most exhaustive phase of its capital spending program and will soon be generating robust free cash flow. In a recent note, UBS noted: "On their most recent conference call [Aug. 8], management indicated that the dividend policy is something the board will be evaluating as cash continues to accumulate. Management indicated they believe 'returning capital to shareholders is a 2012 event...'" In a more bullish scenario, the dividend math becomes more striking. Assuming silver rebounds back to $40 in 2012, a 50% payout equates to a 12.5% dividend yield, according to UBS.

Couer D'Alene will release quarterly results on Nov. 7. Pay close attention to management's commentary about potential dividend plans. This could wind up being a nice snapback AND dividend play.

Copper

There are several ways to play a rebound in copper, but miner Freeport McMoran (FCX - Get Report) is the most logical candidate, due to its heft and global exposure. Shares plunged from $55 to $30 late this summer and are now inching their way back to the $40 mark. The fall from those mid-summer highs is largely due to concerns that China, the biggest consumer of copper, was on the cusp of an economic slowdown. Yet on Monday morning, Oct. 24, a key manufacturing index showed that China's manufacturing sector expanded in September for the first time since June.
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