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Mining for dividends in resource stocks


SONALI VERMA

From Thursday's Globe and Mail


What we’re looking for

Resource companies that are likely to pay out or increase dividends.

With the recent surge in commodity prices, mining companies are rolling in cash. What better way to use it than to return it to investors?

“With companies like Freeport McMoRan doubling dividends, we have heard market participants discussing the possibility of more dividend increases,” write Byron Berry and Sandy Lam at Byron Capital Markets in a recent report titled Commodity Stocks as Yield Plays.


“We would not normally look to cyclicals for yield or dividend increases, but the combination of a powerful commodities bull run and a market starved for yield could create some opportunities.”

More on today’s table

They screened Canada’s 880 metals and mining companies that have a market capitalization of more than $10-million and came up with the 46 that also have positive free cash flow. They found that only 12 issued dividends, with an average yield of 1.03 per cent. They also found 12 companies that have free cash flow yields above 6 per cent.

“We believe this level of FCF yield gives enough headroom for a healthy 3-4 per cent yield and a payout ratio of 40 per cent to 67 per cent,” they said.

“Our investment thesis: Like the commodity, like the cash flow, then decide.”

Among their picks:
Equinox Minerals Ltd. (EQN-T5.980.193.28%),
Inmet Mining Corp. (IMN-T76.000.580.77%),
Russel Metals Inc. (RUS-T23.10-0.15-0.65%),
Neo Material Technologies (NEM-T7.750.283.75%) and
Breakwater Resources Ltd. (BWR-T6.400.101.59%).


Commodity Stocks as Yield Plays
Company Ticker $ Price
(Dec. 9)
Market cap
$-mil
Free Cash Flow
$-mil
Free Cash Flow
% yield
Shares O/S
$-mil
Div/shr Cash
$-mil
Debt
$-mil
NWT Uranium Corp. NWT-T 0.20 25.27 10.97 43.41% 126 - 22.56 0.00
TVI Pacific Inc. TVI-T 0.12 53.67 19.86 37.00% 488 - 4.41 9.06
Rusoro Mining Ltd. RML-T 0.28 132.46 16.87 12.74% 530 - 7.55 2.37
Breakwater Res. BWR-T 6.44 474.29 57.19 12.06% 70 - 88.48 9.15
Noranda Income NIF.UN-T 4.57 174.37 19.18 11.00% 37 - 0.93 184.85
Russel Metals RUS-T 21.53 1,292.62 136.70 10.58% 60 1 317.80 333.60
Globestar Mining GMI-T 1.64 172.44 15.76 9.14% 106 - 14.01 30.57
High River Gold HRG-T 1.20 1,043.55 95.09 9.11% 840 - 125.59 22.09
Neo Material Tech. NEM-T 7.12 856.25 75.20 8.78% 119 - 67.48 11.04
Equinox Minerals EQN-T 6.04 4,105.64 281.16 6.85% 708 - 263.26 455.16
Inmet Mining Corp. IMN-T 74.91 3,910.64 255.81 6.54% 56 0.1 423.76 198.71
Amerigo Resource ARG-T 1.03 184.89 11.52 6.23% 172 - 17.80 9.94
Capstone Mining CS-T 4.60 882.61 47.28 5.36% 199 - 140.85 82.27
Teck Resources TCK.B-T 55.62 33,116.39 1757.00 5.31% 590 0.2 1177.00 5,943.00
First Quantum FM-T 108.50 8,006.39 419.20 5.24% 81 - 632.80 713.80
Golden Star Res. GSC-T 4.43 1,191.74 50.57 4.24% 258 - 184.01 170.12
Lundin Mining LUN-T 7.15 4,193.53 177.39 4.23% 580 - 172.78 47.08
Callinan Mines CAA-T 2.78 125.76 5.10 4.06% 45 - 15.98 -
Labrador Iron Ore LIF.UN-T 66.96 2,206.40 79.02 3.58% 32 2.5 9.86 248.00
Pan Am. Silver PAA-T 39.20 4,368.22 148.60 3.40% 107 0.05 154.44 20.79
WGI Heavy Min. WG-T 0.45 10.05 0.29 2.85% 23 - 2.53 0.48
Hudbay Minerals HBM-T 18.54 2,674.73 75.78 2.83% 149 - 851.74 -
Centerra Gold CG-T 21.36 5,363.44 145.42 2.71% 236 - 282.40 -
Wesdome Gold WDO-T 2.75 279.74 6.78 2.42% 101 - 21.54 15.31
Kinross Gold K-T 18.61 21,562.17 500.20 2.32% 1,131 0.1 1380.80 524.20
Silvercorp Metal SVM-T 12.85 2,170.97 44.54 2.05% 165 0.08 66.26 -
Yamana Gold Inc. YRI-T 12.53 9,360.42 163.44 1.75% 741 0.06 279.69 505.57
Alamos Gold Inc. AGI-T 19.02 2,433.16 32.14 1.32% 116 0.07 160.65 -
Semafo Inc. SMF-T 12.70 3,733.34 48.52 1.30% 272 - 193.27 19.32
Roca Mines Inc. ROK-T 0.28 31.82 0.40 1.25% 93 - 1.18 -
Eldorado Gold ELD-T 18.04 10,335.21 122.49 1.19% 548 0.05 339.40 187.16
Cameco Corp. CCO-T 37.80 14,901.61 171.13 1.15% 393 0.27 353.64 1,031.83
Aurizon Mines ARZ-T 7.57 1,262.98 13.39 1.06% 161 - 130.93 0.75
Western Coal WTN-T 11.95 4,061.28 37.62 0.93% 274 - 116.67 90.77
First Majestic FR-T 12.40 1,272.23 10.59 0.83% 94 - 25.51 5.72
Goldcorp Inc. G-T 46.80 35,255.31 284.50 0.81% 736 0.18 732.00 739.80
Quadra FNX Mining QUX-T 15.18 2,837.22 21.63 0.76% 190 - 322.97 -
Silver Wheaton SLW-T 38.83 14,072.73 105.70 0.75% 345 255.19 114.32
Excellon Res. EXN-T 1.01 279.36 2.03 0.73% 243 - 2.87 -
Imperial Metals III-T 25.48 945.40 6.76 0.72% 37 - 35.19 2.90
New Gold Inc. NGD-T 9.39 3,938.99 24.03 0.61% 392 - 391.00 238.69
Denison Mines DML-T 3.37 1,175.43 5.40 0.46% 340 - 33.11 0.33
Harry Winston Diamond HW-T 14.50 1,178.14 4.82 0.41% 77 - 124.97 257.09
St. Andrew Gold. SAS-T 1.47 526.37 1.44 0.27% 361 - 33.95 25.62
Scorpio Mining SPM-T 1.05 205.70 0.43 0.21% 189 - 8.91 22.18
Newmont Mining NMC-T 60.85 3,502.16 1.35 0.04% 423 - - -
Source: Byron Capital Markets, Bloomberg






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