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3 Under-the-Radar Commodity ETFs for Growth and Income
The global commodities market is changing, opening new doors for investors beyond typical resource investments. While many focus on well-known commodity ETFs, three lesser-known funds have caught our attention, offering both growth potential and income in today's market.
As the world tackles energy changes, supply chain shifts, and growing demand for key minerals, these specialized ETFs zero in on crucial sectors: silver mining, nuclear energy, and energy infrastructure. These funds not only provide focused exposure to these critical commodities, they also pay dividends – a big plus for investors looking for steady income.
Let's take a closer look at how these three ETFs can diversify your portfolio and generate income.
#1. iShares Global Silver Miners ETF
The iShares MSCI Global Silver and Metals Miners ETF (SLVP) has been quietly shining in the commodities market. Since its inception in early 2012, this fund has carved out a niche in the silver mining sector, offering a unique blend of growth and income potential.
The fund's strategy is rooted in tracking the MSCI ACWI Select Silver Miners Investable Market Index. This approach has proven effective as silver's industrial applications continue to expand, particularly in areas like photovoltaics, electric vehicle (EV) batteries, and artificial intelligence (AI). The Silver Institute's forecast of demand outpacing supply in 2024 – with expected demand of 1.22 billion ounces against a mine supply just over 1 billion ounces – underscores the potential for SLVP's holdings.
SLVP's performance compares pretty favorably with cash silver prices, which have had a breakout year. SLVP is up 27.4% on a YTD basis, and has gained more than 54% over the last 52 weeks.
SLVP's portfolio is heavily concentrated in North America, with most names in the U.S. and Canada. Pan American Silver Corp (PAAS.TO) leads at 21.83%, followed by Hecla Mining (HL) at 9.13%, Fresnillo (FNLPF) parent company Industrias Penoles (IPOAF) at 7%, and industry heavyweight Newmont (NEM) at 5.45%. First Majestic Silver Corp (AG.TO) completes the top five, contributing over 5% to the mix.
With $250.5 million in assets under management and a reasonable 0.39% expense ratio, SLVP offers an accessible entry point into the silver mining sector. The average daily trading volume of over 210,000 shares ensures decent liquidity.
While its 0.65% dividend yield might not turn heads, the semiannual payouts are notably stable, and have been a reliable source of income over for shareholders over the last 11 years - including through COVID.
#2. VanEck Uranium & Nuclear Energy ETF
The VanEck Uranium & Nuclear Energy ETF (NLR) is making a significant impact in the energy sector, reflecting the growing global emphasis on clean and reliable power sources.
NLR is up 26.2% in 2024 and 24.4% over the past three months alone, underscoring its strong performance amid forecasts for rising electricity demand.
NLR's investment strategy centers on companies that derive at least half of their revenues or assets from uranium-related activities or the broader nuclear energy industry. This approach ensures targeted exposure to the sector while maintaining diversification through a mix of stable utilities, growth-oriented miners, and technology providers. The fund tracks the MVIS Global Uranium & Nuclear Energy Index, aligning with its focus on capturing opportunities within the nuclear energy landscape.
The fundamental drivers behind NLR's success include the escalating need for electricity to support AI advancements, electric vehicles (EVs), and cryptocurrency operations. Additionally, there is a global push for reducing emissions through clean energy sources, with nuclear power expected to be a key player due to its reliability and stability. Governments worldwide are renewing regulatory support for nuclear energy, further enhancing its investment appeal.
With $538.4 million in AUM and a management expense ratio of 0.60%, NLR offers a compelling option for those looking to invest in nuclear energy.
Plus, given its heavy exposure toward the traditionally high-yield utility sector, the fund's annual dividend of $3.26 per share yields a generous 3.59% - providing an attractive income stream alongside its growth potential.
NLR's top holdings reflect its strategic focus: Three Mile Island operator Constellation Energy Corp (CEG) leads with an 8.87% allocation, followed by uranium heavyweight Cameco Corp (CCJ) at 6.87%, and Public Service Enterprise Group Inc (PEG) at 6.84%. BWX Technologies Inc (BWXT) and PG&E Corp (PCG) also feature prominently, with allocations of 6.13% and 5.74%, respectively.
The average daily trading volume of roughly 312,000 shares ensures ample liquidity for most market participants. As the demand for electricity continues to rise, particularly from sectors like AI and advanced technologies, NLR is well-positioned to benefit from these transformative trends in the energy landscape.
#3. Global X MLP & Energy Infrastructure ETF
The Global X MLP & Energy Infrastructure ETF (MLPX) has been reshaping energy investments since its 2013 debut. MLPX's strategy navigates the complex world of energy infrastructure by avoiding direct MLP exposure, focusing instead on General Partners of MLPs and other energy infrastructure corporations. This approach has delivered impressive returns while maintaining tax efficiency for investors.
MLPX's performance is compelling: a 37% year-to-date gain, 18% increase over the past three months, and a robust 44% return over the past year. These figures represent real value creation in the face of significant energy price volatility.
Driving this performance is a combination of growing demand for energy infrastructure, the shift towards cleaner energy sources, and the stability of midstream operations. MLPX's focus on pipelines and storage facilities provides exposure to assets less sensitive to energy price fluctuations. The outlook for MLPX appears promising, with natural gas demand projected to increase 7% in Q4 2024 for residential and commercial use, and industrial demand expected to rise 3% year-over-year.
The fund's top holdings include Williams Companies Inc (WMB) at 9.89%, ONEOK Inc (OKE) at 9.04%, Enbridge Inc (ENB) at 8.84%, TC Energy Corp (TRP) at 7.82%, and Kinder Morgan Inc (KMI) at 7.01%.
MLPX boasts $2.15 billion in AUM with a 0.45% expense ratio. With an average daily trading volume of around 300,000 shares, MLPX offers reasonable liquidity for most retail investors.
Its 4.23% dividend yield is particularly attractive in today's yield-hungry environment, and the fund has over a decade of consistent dividend payments to its credit.
Conclusion
Looking beyond mainstream commodity plays, SLVP, NLR, and MLPX stand out as hidden gems in today's ETF market. From silver's mounting supply deficit to nuclear power's comeback and the reliable cash flows of energy infrastructure, these under-the-radar ETFs pack a punch with focused plays on real assets that offer both growth potential and steady income streams. For investors willing to venture off the beaten path, these funds offer compelling ways to diversify.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
