By Matt Doiron
Income investors sometimes treat a decline in the price of a high-yielding stock as a reason to buy more shares - and even in the current market environment, with indices hitting all-time highs, many stocks (notably a number of natural resources names) have decreased in value. Of course, in many cases part of the reason these stocks have been in decline is that the fundamentals of their business have deteriorated and the market is skeptical that they will be able to continue paying these high yields. Using data from Fidelity, here are five stocks that are down by at least 20% in the last 13 weeks and currently pay dividend yields of 3.5% or higher:
Global gold and copper miner Newmont Mining (NYSE:NEM) leads our list, as the stock is down 23% in the last quarter of the year and the current dividend yield for the company is 4.2%. Newmont has actually more than tripled its quarterly dividend payment since the middle of 2010, but we imagine that the market is becoming much less confident in the ability of high gold prices to sustain that yield despite the fact that the stock trades at nine times trailing earnings. First Eagle Investment Management reported a position of 6.3 million shares in Newmont at the end of December (find First Eagle's favorite stocks).
IAMGOLD (NYSE:IAG) has been another unpopular name in the market recently: earnings fell 37% in the fourth quarter of 2012 versus a year earlier, and the stock price is down by about that amount in the last few months. Historically IAMGOLD has been increasing its dividend payments as well, and as a result the yield is 4.9% at current prices. Earnings multiples are also low here - for example, the forward P/E is only 7. Billionaire John Paulson has notoriously been bullish on gold, and his Paulson & Co. disclosed ownership of 3.9 million shares in its most recent 13F filing (see Paulson's stock picks).
The $1.3 billion market cap boutique investment bank Greenhill (NYSE:GHL) has been making quarterly dividend payments of 45 cents per share since March 2008 (when it actually increased its distribution), which makes for a yield of nearly 4% at these levels. Business has been slow recently - the current price is 36 times Greenhill's trailing earnings, even with the stock down by 21% in the last 13 weeks - but Wall Street analysts expect the bank to recover. Their consensus forecast for 2014 implies a forward P/E of 19, and while that is high in value terms it might be more reasonable when taking the yield into account.
Another small-cap stock paying nearly 4% is Pan American Silver (NASDAQ:PAAS), although the silver miner got to that level only recently by more than doubling its quarterly payment to 12.5 cents per share. Even with a positive reaction from the market following the announcement of the increased dividend, Pan American is still down 28% from the end of January. Its forward earnings multiple of 11 indicates that it too would be in value territory if it hits Street targets, though those forecasts do incorporate significant improvements on the bottom line from Pan American's recent numbers.
Barrick Gold (NYSE:ABX), a gold miner with a market capitalization of $19 billion, rounds out our list of on-sale dividend stocks. Like the other gold miners we've discussed, the stock price has fallen on doubt over how profitable these companies will be going forward. Quarterly dividend payments of 20 cents per share make for a dividend yield of 4.3%, though we'd note that Barrick temporarily reduced its payments in the middle of 2010. Platinum Asset Management, managed by billionaire Kerr Neilson, increased its stake in Barrick by 13% between October and December 2012 to a total of 2.9 million shares (check out more stocks Platinum was buying).
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: This article is written by Insider Monkey's writer, Matt Doiron, and edited by Meena Krishnamsetty. They don't have any business relationships with any of the companies mentioned in this article and they didn't receive compensation (other than from Insider Monkey and Seeking Alpha) to write this article.