Gold Stocks Boost Dividends

Montreal, Canada

More gold stocks are paying dividends as profits continue to boom.

Investors have rarely looked to gold mining companies as cash-paying entities. But as gold prices rise for the eleventh straight year and accelerate a decade-long bull market, more companies are announcing dividend payouts.

I suspect this trend will continue. It’s also likely to attract the attention of equity-income investors seeking a combination of capital growth and modest income. That’s especially true amid a torrent rally for world markets over the past 26 months that has pushed global dividend yields to levels unseen since late 2007; the MSCI World Index yields just 2.3% and the S&P 500 Index yields a paltry 1.8%.

On Monday, Centerra Gold (Toronto-CG), a Canadian mid-cap producer, announced better than expected Q1 earnings and boosted its dividend by 67% to C$0.10 cents per share. The company also announced a special dividend of C$0.30 cents per share. Combined, the cash-flow will yield about 2% to investors – not too shabby for a mid-cap gold mining concern.

Other miners are also doing the same.

Goldcorp (NYSE-GG), one of my favorite gold producers since 2004, doubled its monthly dividend last November to $0.03 cents per share or 0.69% per year based on the latest closing price.

Barrick Gold (NYSE-ABX), the world’s largest gold producer based on market value, pays among the biggest dividends in the sector at roughly 1% per annum. Barrick made an offer last week to boost its copper revenues to 20% of total sales following a bid for Equinox Minerals.

The list goes on. South Africa’s AngloGold Ashanti (NYSE-AU), a top holding of hedge fund king, John Paulson, is also raising its payout. So is mid-cap producer Yamana Gold (NYSE-AUY). Another giant, Newmont Mining (NYSE-NEM), has also raised its dividends over the last several years.

To be sure, gold stocks continue to pay small dividends compared to stodgy utilities, healthcare and telecom stocks. But unlike those industries, the gold miners are making a bundle as gold prices continue to rise coupled by harder to find above-ground discoveries. That’s the sort of business I like.

Gold stocks are rapidly becoming the new cash Kings in an age of rising currency volatility, widespread currency debasement in the West and growing sovereign debt dislocations in Europe, and increasingly, in the United States and Japan. That’s the sort of environment where gold will continue to thrive, particularly if the Fed keeps inflation-adjusted rates negative for the foreseeable future.

Average rating
(0 votes)