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Summary

  • Caledonia Mining has declared a quarterly dividend of C$0.015/share.
  • This has no bearing on my investment thesis except that it reaffirms my belief that the company shouldn't have trouble getting its money out of Zimbabwe.
  • The risk/reward has changed since March given the increase in the share price, and given the risk of mining in Zimbabwe I would not initiate a position at these levels.

Caledonia Mining (OTCQX:CALVF) recently announced its intent to pay a C$0.015/share dividend per quarter, making it one of the few high dividend gold mining stocks. The company has paid a high dividend in the past, but this is the first time that we are seeing a regular quarterly dividend.

The fact that Caledonia Mining is unique in its dividend policy might draw investor interest despite the high risk of investing in Zimbabwe, and it indicates that management is confident in its ability to get its capital out of the country. However investors should also note that Caledonia Mining may be a cash-flow machine, but it has no growth, and this could keep some investors away.

Ultimately, with the stock up 27% since I recommended it in March I think a lot of the upside is baked into the stock, especially since the gold price is down 2.5% in this time frame. However keep in mind that I heavily discounted cash-flow in coming up with my "buy" recommendation, and I also only used mineral reserves in my estimate, which allow for 7 years of production, despite the fact that the mine has a long history of production, and it likely has a long future of production as well. If the political situation improves in Zimbabwe then it makes sense to use a lower discount rate, and combined with additional production beyond 7 years one could justify paying up for this stock. But this first "if" is a big one.

Editor's Note: This article covers a stock trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

Source: Update: Caledonia Mining Updates Its Dividend Policy