Materials sector companies engage in the discovery, extraction, processing, and distribution of metals, chemicals, forestry products, and construction materials. Its primary segments include agricultural inputs, mining, paper products, specialty chemicals, lumber, and copper, steel, and aluminum producers.

While the segment is highly cyclical, there are corners of the sector that dividend investors flock to for stable dividends and high yields. Diversified chemicals, agricultural inputs, and packaging companies are particularly interesting dividend investments, whereas mining and metals companies historically offer less reliable and lower-yielding income streams.

The companies in our materials stocks list include stocks traded on the NYSE or NASDAQ exchanges, many of which are also S&P 500 constituents.

Finding materials dividend stocks using our lists

We designed our customizable sector stock lists to simplify finding and analyzing the best materials stocks to buy. The stocks listed on this page can be compared based on key dividend, valuation, performance, and fundamental metrics in one location.

Alternatively, you can add any stock in this list to our stock comparison tool to compare key metrics side-by-side for a handpicked selection of stocks.

Industries

The materials sector is divided into several industries, including the primary operating segments defined below.

• Agricultural inputs: Companies that produce essential farming supplies such as fertilizers, pesticides, seeds, and soil treatments to enhance crop yield and efficiency.
• Aluminum: This industry includes companies involved in the mining, refining, and producing of aluminum, a lightweight and corrosion-resistant metal used in various applications.
• Chemicals: Encompasses firms that manufacture specialty, industrial, and commodity chemicals used across multiple industries, including agriculture, pharmaceuticals, and manufacturing.
• Construction materials: Includes producers of cement, aggregates, concrete, and related products essential for infrastructure and real estate development.
• Copper: Involves companies that mine, refine, and process copper, a key industrial metal used in electrical wiring, construction, and renewable energy infrastructure.
• Gold: Includes gold mining and exploration companies that extract and process gold for use in jewelry, investment, and industrial applications.
• Industrial materials: Covers companies producing essential construction and manufacturing inputs like cement, glass, and composites.
• Other precious metals: Consists of companies mining and refining metals like platinum and palladium, which have applications in jewelry, automotive, and industrial sectors.
• Paper, lumber, and forest products: Represents businesses producing timber, pulp, paper, and related products for construction, packaging, and consumer goods.
• Silver: Includes companies mining and refining silver, a metal with uses in electronics, jewelry, and industrial applications, including solar panels.
• Steel: Comprises firms that manufacture and distribute steel, a key material for construction, automotive, and infrastructure projects.

How to invest in materials stocks

Pros of the sector

• Rising materials commodity prices offer an inflation hedge
• Select segments of the sector offer high yields
• Stable long-term demand since materials are critical inputs in our everyday lives
• High barriers to entry

Cons of the sector

• Highly cyclical and volatile with price swings and exposure to economic cycles
• Extremely capital-intensive
• Dividends and earnings can be unstable with high exposure to commodity price changes and resource dependency
• Highly regulated
• Limited long-term growth potential

Investing in materials companies can diversify your portfolio with exposure to commodity prices and the benefits of hedging against inflation. However, it’s important to consider several key factors when buying individual stocks or a materials ETF.

Ratios and fundamentals

Leading companies in the sector will commonly share traits that explain long-term returns and dividend stability. These traits include securing competitive advantage, efficiency, and smart use of debt financing, which result in solid return on equity (ROE) and debt-to-equity (D/E) fundamentals.

Diversified materials companies also tend to outperform non-diversified ones exposed to commodity price swings and economic boom and bust cycles.

Dollar-cost averaging can be important

Beyond fundamentals, timing your entry points and dollar-cost-averaging are important, as performance closely follows volatile commodity price swings and economic growth. We generally prefer dollar-cost-averaging strategies since no human - or AI, yet - can reliably predict economic highs and lows. This strategy ensures capital is consistently allocated to an investment, helping to take advantage of downturns, which can help improve your returns over time.

Popular materials dividend stocks

Some materials dividend stocks are perennial income portfolio favorites due to their long history of high and stable dividends. Such companies include BHP Group Limited (BHP), Rio Tinto Group (RIO), Sherwin-Williams Co.(SHW), and Air Products and Chemicals Inc. (APD).

Popular materials ETFs

There are also a handful of materials ETFs for investors seeking industry and sector-wide exposure. Several of the most popular sector-wide ETFs include Materials Select Sector SPDR Fund (XLB) and Vanguard Materials ETF (VAW).