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4 Dividend-Paying Gold Miners Set to Outperform in 2021

Gold mining stocks have performed well this year due to the Fed’s rate cuts and the economic damage from the coronavirus. Though the vaccine news may lead to a short-term drop in gold prices, the backdrop is still favorable for the precious metal. Gold mining stocks like Newmont Goldcorp (NEM), Barrick Gold (GOLD), Agnico Eagle Mines (AEM), and Buenaventura Mining (BVN) hold the potential to grow in the upcoming months and they pay solid dividends.

Gold mining stocks have been on a tear this year. Investors have flocked to gold as the Fed committed itself to a very dovish path and the US dollar remains weak. Easy monetary policy and economic uncertainty are typically favorable for the yellow metal. Quite naturally, companies involved in mining gold continued to climb as evident from the VanEck Vectors Gold Miners ETF’s (GDX) nearly 27% gain so far this year.

When investors think of gold, they usually buy them for hedging the risk of investing in equities rather than dividends. However, there are certain gold mining stocks that not only hold solid growth potential but also pay high dividends. A recent report by VanEck Securities showed that “precious metal miners have strong balance sheets. They tend to reward investors with dividends and much, if not all, of the group, will be cash flow positive at some point next year.”

Hence, this is the appropriate time for dividend investing as the recent slump in the gold spot prices could end up being an attractive entry point. Here are four stocks that pay outstanding dividends to their investors and should gain significantly as gold prices soar: Newmont Goldcorp Corporation (NEM), Barrick Gold Corporation (GOLD), Agnico Eagle Mines Limited (AEM), and Buenaventura Mining Company Inc. (BVN).

Newmont Goldcorp Corporation (NEM)

NEM engages in the acquisition, development, production, and exploration of gold, copper, silver, zinc, and lead. The company has operations and assets in the United States and internationally. NEM has the largest gold reserve base in the industry underpinned by its world-class ore bodies in top tier jurisdictions.

NEM formed an exploration joint venture with Agnico Eagle Mines Limited (AEM) on September 29th, to explore the Anzá project and advance other prospective gold targets of district-scale potential in Colombia. Moreover, funding for NEM’s capital projects Tanami Expansion 2 in Australia and Musselwhite Materials Handling in North America, have been approved in the previous quarter and the projects are in execution.

During the past three years, the average dividends per share growth rate for NEM was 65.9% per year. In the third quarter of 2020, the company generated a record $1.3 billion free cash flow, growing 256% year-over-year. Consequently, NEM declared a dividend of $0.40 per share, a sequential increase of 60%. The annual dividend cumulates to $1.60, which translates into a dividend yield of 2.44%.

NEM produced 1.5 million attributable ounces of gold in the last reported quarter. Revenue increased 17% year-over-year to $3.17 billion, primarily due to higher average realized gold prices. Non-GAAP EPS for the quarter came in at $0.87, compared to the year-ago value of $0.86. NEM is efficiently capitalizing on its portfolio strength and higher gold prices. Hence, analysts expect NEM’s EPS to grow 72.1% next year.

NEM closed yesterday’s trading session at $65.63, gaining 52.7% year-to-date. The stock is up 4.6% in the past month and is presently trading just 9.1% below its 52-week high of $72.22.

How does NEM stack up for the POWR Ratings?

A for Trade Grade

B for Buy & Hold Grade

A for Peer Grade

B for Overall POWR Rating.

It is ranked #1 out of 30 stocks in the Miners – Gold industry.

Barrick Gold Corporation (GOLD)

GOLD engages in the exploration, mine development, production, and sale of gold and copper properties. GOLD’s operations span five continents, making it the largest gold miner on the planet. It has ownership interests in producing gold mines that are located throughout the Americas and Africa.

GOLD’s credit rating was recently upgraded to Baa1 from Baa2 by Moody’s Investors Service. After the third quarter, GOLD and the government of Papua New Guinea announced that they had agreed in principle on the formation of a new partnership to operate the Porgera mine.

GOLD’s dividend has grown at a CAGR of 9.1% over the last three years. The current annual dividend of $0.36 translates into a 1.40% yield. The most recent dividend declared by the company was $0.09 for the third quarter, implying a 12.5% increase from the quarter-ago pay-out as operating cash flow of $1.9 billion, increased 80% and free cash flow grew 151% to $1.3 billion, sequentially.

Net revenue in the last reported quarter climbed 32% year-over-year to $3.54 billion. The company produced 1.155 million ounces of gold during the quarter, primarily due to high gold prices and increased royalty costs. EPS for the quarter came in at $0.5, rising 150% sequentially. GOLD is capturing the benefit of higher commodity prices through agile management and operational efficiency. Hence, analysts expect GOLD’s EPS to grow 26.7% next year.

The stock closed yesterday’s trading session at $25.81. GOLD has gained nearly 27% year-to-date and is presently trading 17.3% below its 52-week high of $31.22.

GOLD is rated “Buy” in our POWR Ratings system, consistent with its strong momentum. It holds a “B” in Trade Grade and Peer Grade. It is ranked #2 out of 30 stocks in the Miners – Gold industry.

Agnico Eagle Mines Limited (AEM)

AEM engages in the exploration, development, and production of mineral properties in Canada, Mexico, and Finland. It primarily produces and sells gold deposits, as well as explores for silver, zinc, and copper deposits. The company operates through Northern Business and Southern Business segments.

In October, AEM announced private placement in Maple Gold Mines Ltd. (TSX-V: MGM) worth $6.18 million for investment purposes. Moreover, AEM formed an exploration joint venture in Colombia with NEM in late September to explore the Anza project.

Over the last three years, dividend payout for AEM grew at a CAGR of 15.2%. The most recent dividend declared by the company was $0.35 for the third quarter. It accounted for a 75% sequential increase in the payout driven by a strong free cash flow of $267.5 million, growing more than 200% year-over-year. The current annual dividend of $1.40 translates into a 1.92% yield.

In the third quarter of 2020, payable gold production came in at 492,693 ounces. Revenues generated from mining operations increased 43.5% year-over-year to $980 million, primarily due to higher average realized prices and gold sales volume. The company reported an adjusted net income of $0.78 per share compared to the year-ago value of $0.32 per share. Many of AEM’s operations are setting monthly production records. Hence, analysts expect next year EPS to rise 108.6% year-over-year.

The stock closed yesterday’s session at $73.03, gaining 19.7% year-to-date. It is up more than 6.5% in the past six months and is presently trading 18% below its all-time high of $89.23.

AEM’s POWR Ratings reflect a promising outlook. It has an overall rating of “Buy” with an “A” for Peer Grade, and a “B” for Trade Grade. Among the 30 stocks in the Miners – Gold industry, it’s ranked #4.

Buenaventura Mining Company Inc. (BVN)

BVN is engaged in the mining, processing, development, and exploration of gold, silver, and other metals in Peru, the United States, Europe, and Asia. The company also produces manganese sulfate, which is used in the agriculture and mining industries. Further, it provides electrical transmission services, energy generation services through hydroelectric power plants, as well as processes chemicals.

BVN has not paid a dividend this year and suspended payouts in April, amid the pandemic, due to uncertainties related to mining activities and aimed to preserve cash. But the management also mentioned that payment of future dividends will be based on BVN’s financial results and cash requirements. The company generated a record $89.2 million in cash from operating activities in the third quarter, growing 125.8% year-over-year. Hence, analysts expect the dividend program to soon be reinstated.

Net sales of $223.4 million for the last reported third quarter remained relatively stable compared to the year-ago quarter. The 30% year-over-year increase in the average realized gold price was partially offset by the 28% decline in the royalty income. Gold production for the quarter came in at 81,595 ounces. The company reported an EPS of $0.10, rising 400% year-over-year.

BVN’s Yanacocha Sulfides project is currently in the definitive feasibility stage. The Environmental Impact Assessment study was approved in March 2019 and the decision to proceed expected in 2021. Hence, the street expects EPS to rise by 8,200% next year.

BVN closed yesterday’s trading session at $11.94, gaining nearly 43% in the last six months. the stock is presently trading 23.5% below its 52-week high of $15.60. It is ranked #16 out of 30 stocks in the Miners – Gold industry.

 


NEM shares were trading at $65.35 per share on Thursday morning, down $0.28 (-0.43%). Year-to-date, NEM has gained 52.05%, versus a 11.96% rise in the benchmark S&P 500 index during the same period.



About the Author: Sidharath Gupta

Sidharath’s passion for the markets and his love of words guided him to becoming a financial journalist. He began his career as an Equity Analyst, researching stocks and preparing in-depth research reports. Sidharath is currently pursuing the CFA program to deepen his knowledge of financial anlaysis and investment strategies.

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