Introduction: Central bank easing policies will undoubtedly debase currency values, subsequently creating a long-term tailwind for precious metal prices. Aside from silver being a precious metal, it also has many industrial applications and therefore will always have demand, especially when the global economy finally comes out of recession.
While it is possible that the fiscal cliff will dictate the direction of the markets in the coming weeks, it just does not change the fact that silver, as opposed to gold, has real-world everyday uses. It's one of the most conductive metals out there and a key part of many electronics and batteries. It remains in high demand for film photography applications, even in a digital age. Silver even has antibacterial qualities, making it an important element of surgical tools and other medical devices. Silver is also utilized in nanotechnology, utensils, jewelry, currencies (in coin and bullion form), mirrors, optics and even in dentistry.
Silver currently trades at $33.11 an ounce and given the appreciation of silver in the last few years, some silver companies have begun to pay shareholders dividends. In this article, I highlight four companies in the silver industry that currently return profits to shareholders in the form of dividends.
in the acquisition, exploration, development, and mining of precious and base metal properties in China and Canada. It operates four silver, lead and zinc mines comprising the Ying, TLP, HPG, and LM mines located in the Ying Mining District in the Henan Province of China. The company also holds interests in the XBG silver, gold, lead and zinc mine with a mining permit covering 26.36 square kilometers; and the XHP silver-gold, lead and zinc mine comprising a 14 square kilometer mining permit located in the Ying Mining District in Henan Province of China. In addition, it engages in operating the BYP gold, lead and zinc project in Hunan Province, as well as mining at the GC silver, lead and zinc project in Guangdong Province in China.
It currently trades at $5.24 with a 52 week trading range of $4.89-$8.45, with average volume of 1.3 million shares exchanging hands daily. It has a multiple of 19.7 yet a high PEG of 3.9. SVM does pay a decent dividend as it yields 1.9% annually.
Hecla Mining (HL): One of the oldest and low cost silver miners in the United States, HL operates out of Coeur d'Alene, Idaho. HL seeks to discover, acquire, develop and produce silver, gold, zinc and lead mines in the United States. HL currently has two mines operating in Alaska and Idaho and is the largest silver producer in the U.S. In 2011, HL produced over 9.5 million ounces of silver at a cash cost of a paltry $1.15 per ounce. HL pays a unique dividend that is a minimum of $0.01 per common share. It also attempts to pay dividends that are tied to the payments it receives for the silver it produces. As this is highly correlated to the price of silver, it fluctuates throughout the year, but has ranged from $0.003 cents per share to $0.022 cents per share in 2012, resulting in an estimated 1.2% dividend yield this year. HL currently trades with a 52 multiple at $5.68 a share and has a 52 week trading range of $3.70-$6.94. On average, about 4.3 million shares exchange hands daily.
operates silver producing properties and assets. The company engages in silver mining and related activities, including exploration, mine development, extraction, processing, refining, and reclamation. It produces and sells silver, gold, copper, lead, and zinc. The company has seven mining operations in Mexico, Peru, Argentina, and Bolivia; the Navidad silver development project in Chubut, Argentina; and the La Preciosa joint-venture project in Durango, Mexico.
It currently trades at $18.35 a share with a 52 week range of $13.49 to $27.11. It trades at 11.2 multiple with a 1.6 PEG ratio and yields 1.1% annually.
Silver Wheaton (SLW): SLW operates as a worldwide silver streaming company. Silver streaming is basically a process by which the company purchases a mining firm's silver production in order to distribute that silver in the market. SLW has contracts to purchase silver in bulk at prices well below market value and then proceeds to sell the silver at a higher price. The company has
14 long-term silver purchase agreements and two long-term precious metal purchase agreements whereby it acquires silver and gold production from companies located in Mexico, the United States, Greece, Sweden, Peru, Chile, Argentina, and Portugal.
SLW currently trades at $35.74 and has a 52 week trading range of $22.94-$41.30. On average, about 4.6 million shares exchange hands daily. The company trades at a 23 multiple but only a 0.67 PEG ratio and currently yields 0.8%.
Bottom line: Those investors who wish to gain exposure to silver long-term can consider investing in the individual silver companies in addition to physical coins and bullion. At current levels, I believe silver and silver companies are opportunity buys, especially for the long-term investor. Over the long-term, the price of silver is set to appreciate as a result of central bank stimulus which in turn will feed the top and bottom lines of the silver companies. Thus with increased profit there is a strong possibility that companies could increase the dividends paid to shareholders, which if reinvested over the long-term back into the stocks, could lead to compounded returns for years to come.
Disclosure: I am long SLW.
Additional disclosure: I may initiate a long position in HL over the next 72 hours.