Top Stocks: 10 Biggest Stock Gainers on the S&P 500 So Far in 2016

We're going to look at the S&P 500 index's hottest stocks from the first half of this year. The broader market turned in a slightly below average performance -- the S&P 500 returned 3.8% as of June 30 -- but, there were, naturally, some huge winners and losers.

2016's biggest stock gainers on the S&P 500 

Data sources: finziv.com and YCharts; data to June 30. Returns for stocks that beat the S&P 500 over the 1- and/or 10-year periods are bold-faced. *Spectra Energy started trading in late 2006.

Newmont Mining is the biggest stock gainer

The biggest stock gainer in the S&P 500 in the first half of this year was Newmont Mining, which returned nearly 118%. Newmont is one of the world's largest gold mining companies, with advanced projects in Africa, Asia, Australia, and North and South America.

Image source: Getty Images.

The combination of higher underlying commodity prices and lower operating costs has led to a Goldilocks period for mining stocks, which have been on fire in 2016. Higher gold and silver prices have been driven in part by investors' flight to safety due to economic uncertainty. This factor was intensified recently because of Brexit, the British voting to leave the EU. Extremely low interest rates have also provided a tailwind for precious metal stocks. These stocks have been capturing the dollars of some investors who might otherwise invest in safe-haven assets such as Treasury bonds if yields weren't so anemic. Operating costs have come down because miners had to focus on improving efficiency over the last few years due to declining commodity prices from 2012 through 2015.

Newmont's stock was in negative territory for both the one- and 10-year periods before its run-up in 2016. Mining stocks often soar and plunge and behave differently than most stocks, so most long-term individual investors should probably stay away. 

Why energy companies dominate the biggest stock gainers list

Oil and gas companies account for five of the ten top-performing stocks in the first half of 2016: ONEOK Inc., Southwestern Energy, Range Resources, Spectra Energy, and EQT. The reason: the partial recovery in the price of oil -- along with natural gas -- which fell off a cliff starting in mid-2014.

Brent Crude Oil Spot Price data by YCharts.

Let's focus on ONEOK Inc., which is in the natural gas infrastructure business, as it's the big winner among the group. The juicy returns shown in the top chart, however, mask a huge stock price drop: The stock plummeted 70% from its all-time high of $63.4 per share in early Sept. 2014 to $19.2 on Jan. 20 of this year. It's now trading at $47.4 per share – down 25% from its peak, but a 147% gain from its low earlier in the year.

ONEOK Inc.'s income comes entirely from its general partner and dividend income from ONEOK Partners, a master limited partnership (MLP), of whose stock it owns a 41% stake. The company's financials have bounced back solidly in 2016 largely because of an increased volume of business and higher fees in its natural gas gathering and processing business, one of its three segments. ONEOK has been steadily transitioning its gathering agreements to a fee-based structure over the last year or so in order to reduce its exposure to commodity prices.

The stock's rebound can be attributed to its solid first-quarter results coupled with income seekers chasing yield – the dividend yield was about 12% earlier this year when the stock bottomed, and is still attractive at 5.2%. Things are looking much brighter for ONEOK than they did last year, and CEO Terry Spencer continues to reiterate that the company expects to sustain its current dividend level throughout 2016.  Many midstream companies have been reducing payouts. 

Biggest stock gainer No. 7: Computer Sciences Corp.

Image source: Computer Sciences Corp.

Computer Sciences Corp. is a global provider of information technology services. Its ranking as a top gainer owes entirely to its stock surging 42% on May 25 after the announcement that Hewlett-Packard Enterprise was spinning off its enterprise services businesses and merging it with CSC.  The company created by the merger, which is expected to close by March 2017, will be a pure-play IT services company with about $26 billion in annual revenue. 

The market obviously loved the news -- HP Enterprises' shares rose as well, but not nearly as much -- because scale matters in this business and because the combined company is expected to produce considerable cost savings. Projected first-year synergies are approximately $1 billion post-close, with a run rate of $1.5 billion by the end of year one.

Biggest stock gainers No. 8 & 10: REITs Iron Mountain & Digital Realty Trust  

Iron Mountain and Digital Realty Trust are both organized as real estate investment trusts -- a class of business that has been soaring recently. The extremely low interest rate environment benefits REITs in two main ways: Borrowing costs are lower, boosting financial performance, and more income-seeking investors pour money into dividend-paying stocks due to the pitifully low yields of interest-bearing assets such as bonds, which means that valuations increase. 

Image source: Iron Mountain.

Iron Mountain provides storage (primarily records) and information management services to a diversified global customer base. Its portfolio consists of approximately 1,100 facilities in 41 countries on six continents. 

The company's year-over-year revenue rose a solid 3.8% on a constant-currency basis in the first quarter. Its stock was yielding a juicy 7% at the start of 2016, though the dividend yield is currently 4.9% due to the stock price run-up. Iron Mountain's dividend payout ratio based on adjusted funds from operations (AFFO) was about 95% in the first quarter, unchanged from the year-ago period. (AFFO is a better measure than net income of how well REITs are performing.) This number suggests that investors shouldn't expect much in the way of a dividend increase. 

Digital Realty Trust operates data centers and provides colocation services to global customers. It sports a 90.9% portfolio occupancy rate. https://www.digitalrealty.com/company/ The company's dividend yield is currently 3.2%; it started the year at 4.5%. Digital Realty's AFFO payout ratio at the end of the first quarter was just 68.8% -- down from 80.7% in the year-ago period -- suggesting that a decent dividend increase could be on the horizon.