3 Basic Materials Dividend Stocks Trouncing The Market

Basic Materials have been getting pummeled in 2012 for a number of reasons, chiefly the slowdown in the world economy, particularly China, and a strong dollar. This sector is the worst performing sector so far, down 0.6% in 2012:

However, over the past month, this sector has outperformed all others, thanks to a falling dollar, and renewed stimulus from the Chinese government:

Here are the top 3 dividend paying stocks in this group over the past month:

They all look pretty good, except when you look at that last metric – Short Float. With a high short float of 21.77%, it seems that many traders are betting against RPC. One big reason is most likely the EPS negative estimates of -15.83% for its next fiscal year. That leaves Halliburton, which we wrote about earlier this month, and Ensco, (ESV), an Oil and Gas Drilling/Exploration stock which struggled in 2011, has some good EPS growth prospects for 2012, and is currently undervalued on a PEG basis:

Dividends: Although it’s not part of the high dividend stocks world, Ensco has a respectable dividend yield, and did raise its quarterly dividend to $.38/share from $.35 in the 1st quarter of 2012, plus, it has a conservative dividend payout ratio. It also made a huge jump in its quarterly dividend payouts in 2010, going from $0.025, up to $0.35, which accounts for its very high 5-year dividend growth rate:

Covered Calls: Even with ESV’s high dividend growth rate, it’s easy to substantially embellish your income on this stock, via selling covered calls. ESV’s December $55.00 call options are now paying 5 times what its next 2 quarterly dividends pay.

Cash Secured Puts: Want to sneak up on this stock, and get a lower entry cost? ESV’s December $52.50 put options offer you a $48.60 break-even price, which is nearly 11% below ESV’s current share price:

Disclosure: Author had no positions in any of the stocks mentioned at the time of this writing.

Disclaimer: This article is written for informational purposes only and isn’t intended as investment advice.