The gold industry has been the second-worst performer so far in 2013 (the worst has been the silver industry), the total return year to date (04/10/2013) was negative at -22.4%, while the appreciation of the Russell 3000 index in the same period was at 11.51%. Nevertheless, there are profitable companies that pay rich dividends among the gold mining companies, and when the gold price rise resumes, a nice capital gain could be expected.
In this article, I tried to determine which of the nine best-yielding gold mining companies, traded in the U.S., is the most attractive for dividend-seeking investors.
I consider that besides dividend yield, the consistency and the rate of raising dividend payments are the most important factors for dividend-seeking investors. Of course, it is also essential that a company has enough earnings growth prospects to maintain increasing dividend payments.
The nine stocks are: Gold Resource Corp (GORO), Newmont Mining Corp. (NEM), IAMGOLD Corp. (IAG), Barrick Gold Corporation (ABX), Nevsun Resources Ltd. (NSU), AuRico Gold Inc. (AUQ), Kinross Gold Corporation (KGC), Compa (BVN) and Agnico-Eagle Mines Ltd. (AEM). All the data for this article were taken from Yahoo Finance and finviz.com on April 11, before the market open.
The table and the charts below present the nine gold mining companies, their last price, the market cap, the forward annual dividend rate, the forward yield, the payout ratio and the average annual dividend rate of growth for the past five years.
The charts above emphasize the consistency of raising dividend payments during the last five years. The chart clearly shows that the NEM and IAG have raised their payouts at a much higher rate than the other gold mining companies in the last five years.
KGC Dividend data by YCharts
KGC Dividend Yield data by YCharts
The charts below present the trailing P/E, forward P/E, the average annual earnings growth estimates for the next five years, the price-to-sales ratio and the price to book value of the nine companies.
Among the nine companies, the NEM and IAG have raised their payouts at a much higher rate. Investing in companies that regularly raise dividends provides security in an uncertain market and means higher returns ahead. Companies that regularly increase dividends are generally more stable. Increasing dividends is the assurance that dividend income retains its purchasing power over time.
The table and the charts below show the most important parameters, for dividend-seeking investors, for these two companies.
IAG Dividend data by YCharts
Which of the two companies is the most attractive for dividend-seeking investors? It is not easy to determine. NEM has a high dividend yield of 4.36%, and the average annual dividend rate of growth for the past five years was very high at 33.43%. But the average annual earnings growth estimates for the next five years is negative at -1.80%, and it is not certain that it will be able to maintain such a high dividend rate. IAG has quite a high dividend yield of 3.89%, and the average annual dividend rate of growth for the past five years was very high at 33.03%. The average annual earnings growth estimates for the next five years is at 3.0%.
In my opinion, in spite of its lower yield, IAMGOLD Corp. is the best choice among the best-yielding gold mining companies I reviewed for dividend-seeking investors, due to its solid yield and its good earnings and dividend growth prospects.