10 Mining Stocks With Top Dividend Yields

NEW YORK (TheStreet) -- The following 10 metals and mining stocks provide higher dividend yields compared to peer stocks and offer investors stable income to overcome higher volatilities in the stock markets. A few of these stocks have been maintaining (or increasing) their dividend payouts for decades.

Consequent to stable income through dividends, the four dividend-yield coal stocks (with market caps of $1.3 billion to $2.5 billion) among the top 10 have low beta values of 0.68-0.97, in comparison to the 1.44 of coal giant Peabody Energy ( BTU), which has a market cap of $13.9 billion. Similarly, the two dividend-yield steel stocks (with market caps of $1.1 billion and $12.0 billion) have low beta values of 1.03 and 1.37, lower than the 1.52 beta value of U.S. Steel ( X), which has a market cap of $6.1 billion.Low beta values means they increase or decrease (in percentage terms) less than stock market indices and, hence, are less risky than peers of similar market capitalization.

The S&P 500 has surged 3.4% so far in October, while the SPDR S&P Metals and Mining ETF ( XME) gained 2.5%, underperforming the broader markets. Stable incomes and low beta values will likely help these stocks outperform peers.

10. Kaiser Aluminum ( KALU) is a leading producer of fabricated aluminum products for aerospace, general engineering, automotive and custom industrial applications.

Aluminum producers have to boost output by almost two-thirds to meet the 5.3% demand growth over the next decade, a scenario that will likely offer attractive long-term returns to shareholders.

On Oct. 13, Kaiser announced purchasing Alexco LLC a manufacturer of hard alloy extrusions for the aerospace industry. This acquisition will complement Kaiser's current offering of sheet, plate, cold finish and drawn tube products for aerospace applications.

Over the past 12 months, return-on-equity stood at 8.3%. In comparison, Alcoa ( AA), Alumina ( AWC), Aluminum Corp of China ( ACH) and Century Aluminum ( CENX) had ROEs of around -9.6%, -0.9%, -8.8% and -20.1%, respectively.

Its quarterly dividend has increased from 18 cents in 2007 to the current 24 cents. Of the five analysts covering the stock, three recommend buying and two holding.

9. Worthington Industries ( WOR) is a diversified metals processing company focusing on steel processing, metal framing and pressure cylinders.

Notwithstanding a drop in 2010 quarterly dividends to 10 cents a share from 17 cents a share during fiscal 2009, Worthington Industries remains a top company by dividend yield. In addition, the company is currently trading at a discount.

For the quarter ended August, earnings tripled to 30 cents a share from 8 cents a year earlier. Year-to-date, the stock returned around 19.8%, while peer companies declined 5.9%.

Return-on-equity stood at 6.4% in the past 12 months, ahead of domestic competitors, while international peers ArcelorMittal ( MT), Posco ( PKX), Mechel ( MTL), Ternium ( TX) and Gerdau Ameristeel ( GNA) had ROEs of 0.2%, 10.8%, 1.9%, 13.2% and -5.6%, respectively.

8. Harsco ( HSC) is a diversified, multinational provider of industrial services and engineered products.

The company's quarterly dividend has increased from 7 cents in 1988 to the current 20.5 cents, declared in September 2010. This marks the 242nd consecutive quarterly cash dividend, since 1939.

The stock offers an attractive dividend yield of 3.42%, in comparison to General Electric's ( GE) 2.98%, 3M's ( MMM) 2.32%, ITT Corp's ( ITT) 2.05% and SPX Corp's ( SPW) 1.48%.

Of the nine analysts covering the stock, four recommend buying, five holding and none advise selling.

7. Nucor ( NUE) is the largest steel producer in the U.S., with annual capacity of 26 million tons, and the world's foremost global steel recycler.

Nucor's dividend yield of 3.83% tops the list of major U.S. steelmakers, in comparison with A.K. Steel's ( AKS) 1.68%, U.S. Steel's ( X) 0.52%, Steel Dynamics' ( STLD) 2.10% and Schnitzer Steel Industries' ( STLD) 0.15%.

On Thursday, the company reported earnings of 7 cents a share for 2010 third quarter, in comparison to 29 cents a share for the second quarter, and loss of 10 cents a share for 2009 third quarter. Utilization rates fell to 68% from 71% during the second quarter.

Following its third-quarter earnings release, the following firms reiterated their ratings: Citigroup (buy), Deutsche Bank (buy), Credit Suisse (outperform) and J.P.Morgan (overweight).

Nucor says it sees maintaining or increasing its dividends going forward. In September, the company declared a cash dividend of 36 cents a share, Nucor's 150th consecutive quarterly cash dividend.

6. Southern Copper ( SCCO) is among the largest integrated copper producers and holds vast reserves. Grupo México has an 80% stake in the company.

The company is set to gain from copper's bullish outlook. Southern Copper will likely outperform peers over the upcoming months, since a 1% rise in copper prices will raise its equity value by 1.3%, according to a J.P.Morgan report.

Based on the company's organic growth plans and reopening of the Cananea mine, analysts expect production to reach 1.3 million tonnes in 2016, implying a remarkable growth rate of 19%.

In July, the company announced a five-year $3.8 billion capital investment plan in the state of Sonoro, Mexico, to boost production and improve cost competitiveness. Improving operational efficiencies helped the company to report operating cash cost per pound of copper, net of by-products credit at 6.4 cents per pound for the first six months of 2010, compared with 49.7 cents per pound in the year-earlier period.

Dividend yield stands at 4.37%, in comparison with Freeport-McMoRan Copper & Gold's ( FCX) 1.01%.

5. Alliance Holdings Group ( AHGP) is a limited partnership formed to own and control Alliance Resource Management GP, LLC., the managing general partner of Alliance Resource Partners ( ARLP), through which it holds a 1.98% general partner interest and the incentive distribution rights in ARLP.

Late July, the company increased quarterly distribution by 3.8% to 48.25 cents, up 12.9% from a year earlier. The company has increased its quarterly dividend gradually from 21.5 cents in early 2006 to the current levels.

Over the past one year, the stock has gained around 103.6%, while peers have returned only 32.7%. Over the past 12 months, the return-on-equity stood at 49.0%, one of top ROEs among coal producers.

According to analysts polled by Bloomberg, the company is set to report earnings of $2.92 per share for 2010 and $3.15 per share for 2011, compared to $1.36 a share during 2009. Of the five analysts covering the stock, two recommend buying and two holding, while one advises selling the stock.

4. Alliance Resource Partners, a stock selling at deep discounts, is a subsidiary of Alliance Holdings. ARLP is a diversified producer and marketer of coal to major utilities and industrial users. The company has facilities in Kentucky, Illinois and Maryland.

Higher sales and a strong contract position led to record second-quarter revenues. The company has already secured a remarkable sales commitment for around 29.8 million tons, 24.2 million tons and 22.3 million tons for delivery during 2011, 2012 and 2013, respectively. For 2010, coal sales are in the range or 30.8 million-31.5 million tons.

ARLP is set to report earnings of $6.55 per share for 2010 and $6.23 per share for 2011, compared to $3.56 a share during 2009, according to analysts polled by Bloomberg. For the third quarter, earnings are projected at $1.89 a share, the highest ever quarterly EPS, up a staggering 232% from the year-earlier period.

The stock has gained around 67.7% over the past one year, while peers returned only 38.2%. The return-on-equity stood at 63.1%, the highest among coal producers. The company's quarterly dividend has increased from 11.5 cents in 1999 to the current 81 cents.

Currently, the stock is trading at an attractive PE multiple of 13.0. In comparison, Walter Energy ( WLT), International Coal Group ( ICO) and Hallador Energy ( HNRG) are trading at higher PE multiples of 21.7, 32.6 and 14.8, respectively.

3. Penn Virginia Resource Partners ( PVR) manages coal and natural resource properties, and a natural gas processing unit in the U.S.

The company is able to maintain high dividend yields by executing long-term lease agreements with third-party mine operators for royalty payments. Quarterly dividends have increased from 17 cents in early 2002 to 47 cents in November 2008, and have stabilized since then.

Penn Virginia expects to benefit from the increase in processed volumes for natural gas liquids during 2010, as producers' drilling is likely to accelerate. Management believes that the merger transaction with Penn Virginia GP Holdings ( PVG), which holds a 37.6% stake in the company, will lower capital costs and improve PVR's competitive positioning. The stock has gained 7.1% since the merger announcement on Sept. 21, despite a dilutive transaction to PVR's shares.

The return-on-equity has been 16.9% during the past 12 months. In comparison, Consol Energy ( CNX), Alpha Natural Resources ( ANR), Arch Coal ( ACI), Massey Energy ( MEE) and Patriot Coal ( PCX) have ROEs of 16.6%, 2.9%, 4.7%, -0.9% and 5.6%, respectively.

2. Natural Resource Partners ( NRP) owns and manages coal properties in Appalachia, the Illinois Basin and the Western United States.

The company has long-term lease agreements with mine operators for royalty payments. Stable cash flows are sustaining higher annual dividends of $2.16. Quarterly dividends rose from 21.15 cents in early 2003 to 54 cents in April 2009, and have stabilized since then.

Besides robust coal market fundamentals, NRP is set to benefit from recent acquisitions and a strong liquidity position. Natural Resources is a low-risk stock, since the company does not operate any of its own assets; rather, it leases them to operators for a royalty, a fixed price, or a percentage of sales, whichever is higher, Zacks Investment Research reports. This business model allows the company to generate cash even if there are any problems at the coal properties.

Earnings per share of $1.17-$1.97 reported between 2006 and 2009 are expected to continue for 2010 and 2011. This strong cash generating capacity enables higher dividend yields.

Recent acquisitions have diversified NRP's business, since they complement its royalty and fee-based business model. This strategy will likely provide long-term upside to shareholders.

The return-on-equity has been 15.1% during the past 12 months. In comparison, Enterprise Products Partners ( EPD), Plains All American Pipeline ( PAA), Peabody's, Oneok Partners ( OKS) and Enbridge Energy Partners ( EEP) have ROEs of 13.2%, 15.1%, 13.0%, 14.7% and 8.5%, respectively.

1. Great Northern Iron Ore Properties ( GNI), a conventional non-voting trust, owns interests in fee-based lands, both mineral and non-mineral, on the Mesabi Iron Range in northeastern Minnesota. The company earns royalties on its properties leased to steel and mining companies.

The recent quarterly dividends stand at $3.75, $2.75 and $2.00 per share, compared to quarterly dividends of $1.80 a share during the first three quarters of 2009. Royalties increased during 2010 due to a surge in mining output from Trust lands.

The stock offers an attractive dividend yield of 9.35% in comparison to Cliffs Natural Resources' ( CLF) 0.75%. This high dividend yield reduces some of the stock's risk. Beta of GNI is 0.46, in comparison to Cliffs' 1.69; Cliffs' market cap is almost 50 times the market cap of GNI.

More from Stocks

Tesla's $78,000 Model 3 Is a Bargain. Here's Why

Tesla's $78,000 Model 3 Is a Bargain. Here's Why

Is Tesla's Stock Set to Nearly Double to $500?

Is Tesla's Stock Set to Nearly Double to $500?

Dow Rises Sharply as U.S.-China Trade Tensions Thaw

Dow Rises Sharply as U.S.-China Trade Tensions Thaw

Steel Stocks Are Monday's Biggest Losers From Cooling China Trade Tensions

Steel Stocks Are Monday's Biggest Losers From Cooling China Trade Tensions

GE's $11.1 Billion Deal With Wabtec Should Have Warren Buffett Feeling Very Sad

GE's $11.1 Billion Deal With Wabtec Should Have Warren Buffett Feeling Very Sad