If you take a look at the news, you may believe that stockholders who own oil, gas, copper and lead stocks sit at the top of the food chain. But is that true? In this piece, we'll examine the nuances of owning natural resources stocks.
We'll also take a look at Teck Resources Ltd. (NYSE: TECK) as well as go over the pros and cons of investing in Teck Resources Ltd. If you're looking for an addition to your portfolio, Teck may be the answer. Of course, whether it's a good investment for you depends on your goals, specific requirements and more.
About Teck Resources Limited
Teck Resources Limited, headquartered in Vancouver, explores, acquires and produces natural resources worldwide, including the following:
- Steelmaking coal
- Blended bitumen
- Zinc concentrates
- Other metals
The company has featured an August rally on the heels of 126% revenue growth to nearly $5.8 billion. In Q2, the profit attributable to shareholders amounted to a record $1.8 billion ($3.30 per share) in Q2 2022 and profit attributable to shareholders was a quarterly record of $1.7 billion.
Cash flow from operations was $2.9 billion in Q2 2022 and the company ended the quarter with a cash balance of $2.7 billion. The company also returned $67 million to shareholders through dividends and it declared a $0.125 per share dividend and authorized up to a $500 million share buyback.
Teck's copper business unit gross profit increased 5% and zinc business unit gross profit more than doubled from a year ago. Steelmaking coal prices increased $2.3 billion gross profit as well.
What's Going on with Natural Resource Stocks?
Teck Resources Ltd. explores and produces a wide range of natural resources. Natural resources can include renewable energy stocks to produce electricity (using solar, wind, hydroelectric and geothermal power); oil and gas stocks through companies that produce, refine and export fossil fuels and oil stocks). Natural gas stocks come from natural gas companies that find, produce and export natural gas. Liquefied natural gas stocks come from companies that develop and operate facilities to liquefy natural gas.
- Renewable energy stocks: The global renewable energy will likely grow $2 trillion over the next eight years from $881.7 billion in 2020, according to market research firm Allied Market Research.
- Oil and gas stocks: Rapidly rising energy prices made 2022 an exciting year for oil and gas stocks, though in 2022, they have gone down 25%. The energy sector hailed more than a 40% increase in Q1, whereas the S&P 500 lagged behind precipitously.
- Natural gas stocks: Natural gas, which contains many different types of compounds, is a fossil energy source that exists under the earth's surface. After bursting on the scene in early 2022, natural gas stocks have suffered losses due to rising inflation. However, with the winter season coming up, the sector will likely boost upward. Liquefied natural gas, on the other hand, is created by cooling natural gas and reducing its volume in order to ship it.
- Copper, tin, silver, lithium, cobalt, palladium, platinum, nickel, manganese and others: Is it worth going back to basics with the metals that are naturally occuring on this earth? Let's take copper as an example. It may seem like an antiquated investment opportunity, due to its soft, ductile properties that have been in use by humans for thousands of years. However, copper is no stranger to its use in infrastructure and construction. Copper has unusually high thermal and electrical conductivity for use in the emerging electrical vehicle (EV) industry, as a metal alloy, minting of coins and in industrial machinery such as heat exchangers. Copper is used as a pigment, bacteriostatic agents and fungicide. Copper tends to go gangbusters during high-flying economic cycles, which can make copper stocks a great investment option for market optimists. Choosing successful investments that fit among these naturally occurring resources can be a great approach.
Pros and Cons of Investing in Teck Resources Ltd.
Let's take a look at the reasons you may want to consider investing in Teck Resources Ltd. and why you may want to consider investing in a different investment.
First, look at the benefits of investing in Teck Resources Ltd.:
- Returns: Teck Resources has delivered a 19.19% return since the beginning of 2022 and its 12-month returns are up by 50.39%. The stock is currently at $35.83 per share as of this writing.
- Dividend payment: While it's true that Teck Resources Ltd. is new to paying a dividend (it has done so for one year), the company pays out 5% of its earnings in the form of a dividend, indicating that it should be able to support its dividend in the future. Its dividend yield is currently 1.11%.
Now, let's take a look at the potential downsides of investing in the company:
- Rising expenses: Teck faced rising costs in areas including fuel, transportation, labor and other line item expenses. Inflationary pressures have increased our operating costs by 14% compared to the same period last year, of which approximately half relates to an increase in diesel costs.
- Lack of investment: Due to the popularity of ESG (environmental, social and governance) investing, many fund managers diverge capital toward industries like Teck Resources Ltd.
- Supply chain issues: Supply chain disruptions, including computer chips, have affected the auto industry (such as palladium) and therefore impacted Teck Resources Ltd. as well.
Should Teck Ltd. Go on Your List?
Whether Teck Ltd. should go on your list or not depends on your goals and preferences. Whether you're taken by Teck's dividend potential or commitment to responsible mining and mineral development or investments in energy assets, it's a good idea to consider your goals and personal investments. Consider a diversified portfolio and decide whether Teck can fit well into a portfolio that is widely dispersed among various equities, exchange-traded funds and more.
Companies Mentioned in This Article:
|Company||Current Price||Price Change||Dividend Yield||P/E Ratio||Consensus Rating||Consensus Price Target|
|Teck Resources (TECK)||$43.40||+6.0%||0.85%||10.43||Moderate Buy||$61.86|