Lithium is poised to be one of the major growth industries for the next decade. Demand for lithium continues to rise in the U.S. and around the world, due to its use in multiple markets such as electric vehicles and renewable energy.

For investors interested in gaining exposure to lithium, Sociedad Quimica Y Minera de Chile ADR (SQM) may be worth a closer look. SQM is an international company with some of the highest-quality lithium mining assets in the world. As a result, SQM is one of the top lithium stocks for 2019 and beyond.

Premier Lithium Assets

Lithium has tremendous potential because it is a key input in multiple high-growth markets, including smartphones, electric vehicles, and renewable energy storage. SQM is a huge producer of lithium carbonate and lithium hydroxide, meaning it is optimally positioned to capitalize on growing demand for lithium.

SQM operates five businesses in all, including plant nutrition, iodine, potassium, and industrial chemicals, in addition to its lithium operations. While the company has a diversified business model, according to SQM it is the largest and lowest-cost lithium producer.

Last year was another of steady growth for SQM. The company grew revenue by 5% in 2018, and grew adjusted earnings per share by 2.5% for the year. Lithium demand increased 25% in 2018, due to the continued growth in electric vehicles, and higher lithium prices contributed to the company’s growth. Severe rain in northern Chile disrupted the company’s production facilities in the fourth quarter, but this is not expected to have a lasting impact.

The long-term future remains extremely positive for lithium, and SQM by extension. SQM expects lithium demand to rise by 20% in 2010. The leading driver of increased demand is attributed to electric vehicles. The company expects weak pricing this year, as new supply hits the market. However, such strong demand for lithium is likely to put upward pressure on prices sooner or later.

SQM has an aggressive dividend policy. It essentially distributes all of its profits, unless it needs to prioritize debt reduction due to a distressed balance sheet. The stock has a nearly 5% dividend yield, which makes it a very appealing stock for income investors.

Not For The Risk-Averse

As a major lithium producer, SQM is a volatile company. Its profits and the share price have seen dramatic swings over the past several years. Operating in cyclical businesses means investors should expect continued volatility in the years ahead.

While SQM has a high dividend yield near 5%, the company had a dividend payout ratio above 100% in 2018. This is unsustainable, meaning the company will need to increase its profits in order to sustain the dividend payout going forward.

For investors willing to take the risk, SQM could be a rewarding growth stock, with a strong dividend payout as well. But only investors with a high degree of risk tolerance should consider buying SQM shares.