Photo by Nicholas Cappello on Unsplash
 

Investors are facing a difficult backdrop for stocks this year due to the impact of inflation, the effect of rising interest rates, and the increasing risk of a recession. During this period, some materials stocks are interesting candidates thanks to the essential nature of their business. In this article, we will discuss the prospects of three materials stocks, which offer above-average dividend yields.
 

Sonoco Products (SON)

Sonoco Products provides packaging, industrial products, and supply chain services to its customers. The markets that use the company’s products include appliances, electronics, beverage, construction, and food industries. The company generates more than $7 billion in annual sales. Sonoco Products is now composed of 2 segments, Consumer Packaging, and Industrial Packaging, with all other businesses listed as “all other”.

Sonoco has increased its dividend for 41 consecutive years, including a 4% hike in April 2023. In the 2023 second quarter, revenue declined 11% to $1.7 billion, but this was $240 million above estimates. Adjusted earnings-per-share of $1.38 compared unfavorably to $1.76 in the prior year.

For the quarter, Consumer Packaging revenues were down 7% to $924 million as destocking from customers weighed on volumes. Strength in flexible packaging and rigid paper container businesses was offset by weaker results in the metal packaging and rigid plastic product lines.

The company provided an updated outlook for 2023 as well, now expecting adjusted earnings-per-share of $5.10 to $5.40 for the year. This means Sonoco’s dividend payout ratio for 2023 is expected to be approximately 39%, which indicates a safe dividend. SON shares currently yield 3.8% which makes the stock attractive for income investors.
 

FMC Corp. (FMC)

FMC Corporation is an agricultural sciences company that provides crop protection, plant health, and professional pest and turf management products. Through acquisitions, FMC is now one of the five largest patented crop chemical companies. The company markets its products through its own sales organization and through alliance partners, independent distributors, and sales representatives.

In the 2023 second quarter, the company reported revenue of $1.01 billion and adjusted earnings per diluted share of $0.24. Second-quarter revenue was driven by a 3% contribution from price and a 31% decline in volume with a 2% currency headwind, especially in EMEA. North American revenue was down 25% versus the prior-year period as partners, the distribution channel, and growers reduced inventory. Sales in EMEA declined 26% due to channel and grower destocking as well as adverse weather conditions across Europe.

For 2023, revenues are now expected to be in the range of $5.2 to $5.4 billion, and adjusted earnings per diluted share are expected in the range of $5.86 to $6.80.

With the current payout ratio of 31%, FMC’s dividend payments are well covered by earnings. Given the expected earnings growth, there is still room for the dividend to continue to grow moving forward while maintaining a payout ratio.

FMC stock currently yields 3.5%.
 

Worthington Industries (WOR)

Worthington Industries is a diversified industrial manufacturing company focused on value-added steel processing and manufactured metal products. Steel processing and pressure cylinders are the two primary business segments of the company. Worthington Industries’ metal products include pressure cylinders for liquefied petroleum gas, compressed natural gas, oxygen, refrigerant, and other industrial gas storage.

On June 25th, 2023, Worthington Industries announced Q4 2023 results, reporting non-GAAP EPS of $2.61 for the quarter, beating market consensus EPS by $0.90. In addition, the company reported revenue of $1.22 billion. Worthington Industries delivered record earnings per share in the final quarter of its fiscal year, driven mostly by growth from its Steel Processing unit.

Despite minor pockets of market volatility, demand for the majority of the company's core end markets remained strong, and all business sectors delivered strong cash flows and earnings. As a result, we forecast an EPS growth of 10.0%, in line with the company’s long-term growth forecast.

The company has paid a consistent dividend to its shareholders with a 10-year payout ratio averaging 32%, indicating a secure payout. WOR stock currently yields 2.1%.

More By This Author:

3 Dividend Growth Stocks For High Total Returns
3 Quality Dividend Stocks For A Bear Market
3 Dividend Aristocrats For Double-Digit Annual Returns