Finder's Pick for
Materials stocks make up the materials sector — one of the 11 major sectors of the stock market. These companies find, develop and process raw materials such as oil, timber and metal. Since most of these materials are used in construction and packaging, any changes in the business cycle and economy can affect their performance.
The materials sector includes companies that make basic materials that we use in everyday items. The 5 major industries include:
When investing in the materials sector, you have 2 options: exchange-traded funds (ETFs) or individual stocks. ETFs track the sector and hold a basket of materials stocks, which lowers your exposure to risk by diversifying your portfolio. But they usually come with higher fees and pay lower dividends. Owning shares of individual stocks can offer higher payouts, but can be riskier.
Here’s a snapshot of how to invest in stocks and ETFs:
Several popular ETFs that follow the materials sector include:
The stock market is in constant flux, and individual stocks can change prices quickly. But you can use the performance of ETFs to gauge the average performance of a sector over time. The graph below tracks the Materials Select Sector SPDR ETF (XLB), which can be used to track the performance of materials stocks. Note that figures are shown in US dollars.
Materials stocks provide the raw materials necessary to produce goods and services. These are popular investments because these companies tend to thrive in a strong economy.
Many materials stocks also generate regular cash flow and return cash to shareholders through consistent dividends. The SPDR S&P Metals and Mining ETF dividend yield is 1.03%, while the Vanguard Materials Index Fund ETF dividend yield is 1.46%. For comparison, the dividend yield of the S&P 500 index is 1.35% as of June 30, 2021.
A few individual stocks are boasting dividend yields well above this. For example, Compass Minerals International has a dividend yield of 4.4% as of June 9, 2021 and International Paper Company has a dividend yield of 3.5% as of August 13, 2021.
The materials sector is especially vulnerable to the global economy, international politics and fluctuating demand. For example, materials stocks can get caught in the crosshairs of geopolitical tensions and trade wars. Tariffs can lead to higher prices, which can delay or deter sales.
Materials stocks can also plunge when there is low demand, especially during economic recessions.
If you’re planning on buying stocks or ETFs, you’ll need a brokerage account. Compare your options to find the best fit.
The materials sector may be a good option if you’re looking for cash dividends and the potential for profit in a flourishing economy. But it comes with unique risks because of its sensitivity to the global economy, trade and politics.
Be sure to explore your online trading platform options to pick a brokerage account that best fits your investment portfolio.
We’ve rounded up stats on some of the most popular COVID testing stocks, along with information on how they compare and how to invest.Read more…
Review the benefits and risks of investing in these tech-focused ETFs.Read more…
American depositary shares provide a simple way to invest in foreign companies on US stock exchanges. But there are pros and cons to consider.Read more…
This Ark Invest ETF has piqued the interest of many market analysts. Here’s what you need to know about the Ark Space Exploration ETF.Read more…
The metaverse is here. What do you need to know before investing?Read more…
View our list of the top trending stocks today, and read our guide to choosing the best stocks to buy right now.
Get low fees and access many different types of accounts, platforms and investments with this reputable online broker.
Sweden-based luxury car manufacturer, Volvo, is publicly trading on the Nasdaq Stockholm AB. Find out how to buy Volvo stock in Canada.
Review the benefits and risks of investing in these tech-focused ETFs.
American depositary shares provide a simple way to invest in foreign companies on US stock exchanges. But there are pros and cons to consider.
Ark Investment Management is launching a space exploration ETF. Here’s what we know about the fund and its potential competitors.
The metaverse is here. What do you need to know before investing?
One of the world’s first Bitcoin ETFs to pay a monthly dividend yield is launching on the TSX. Here’s how to invest in Canada.
Purpose Investments is preparing to launch another crypto ETF, which will give investors broad exposure to the cryptocurrency industry.
You must be logged in to post a comment.
finder.com is an independent comparison platform and information service that aims to provide you with the tools you need to make better decisions. While we are independent, the offers that appear on this site are from companies from which finder.com receives compensation. We may receive compensation from our partners for placement of their products or services. We may also receive compensation if you click on certain links posted on our site. While compensation arrangements may affect the order, position or placement of product information, it doesn't influence our assessment of those products. Please don't interpret the order in which products appear on our Site as any endorsement or recommendation from us. finder.com compares a wide range of products, providers and services but we don't provide information on all available products, providers or services. Please appreciate that there may be other options available to you than the products, providers or services covered by our service.