Commodities & Metals

Screening for Dividends in Gold (NEM, GFI, AUY, RGLD, GGN)

Gold has seen a major run-up even before the Middle East and North Africa strife.  This has lent support to many gold mining stocks and gold royalty players as well along with the growing number of Gold ETF and ETN products.  Yet, despite a climate for rapidly rising profits, gold companies tend to have tiny dividend payouts to their shareholders.  Almost all the appreciation revolves around risk in the price of gold rather than in income.

We decided to screen the gold universe to find out which companies pay dividends and then which ones pay right “about” 1.0% and higher.  There are very few, but the search is as follows: Newmont Mining Corp. (NYSE: NEM); Gold Fields Ltd. (NYSE: GFI); Yamana Gold Inc. (NYSE: AUY); Royal Gold, Inc. (NASDAQ: RGLD); and The Gabelli Global Gold, Natural Resources & Income Trust (NYSE: GGN).

Newmont Mining Corp. (NYSE: NEM) has one of the better cost structures out there and its jump in the 2010 payout to $0.15 from $0.10 per quarter has made a difference.  Its dividend had been at $0.10 since 2004.  The current dividend at $54.85 is roughly 1.1% and the 52-week trading range is $48.20 to $65.50.  Thomson Reuters has estimates for this Colorado-based operator at $5.07 EPS for 2011, so any gain to earnings would lend more support for future dividend hikes if it wanted to stand out from the crowd.

Gold Fields Ltd. (NYSE: GFI) is based in South Africa and it pays dividends semi-annually rather than quarterly to its ADR holders.  The financial reporting services count the yield above 1% but it is generally not a steady dividend and it has fluctuations to it.  Due to fluctuations and currency risks, we are skipping this as a “reliable 1% dividend” gold stock.

Yamana Gold Inc. (NYSE: AUY) is a Canadian-based gold producer with a $0.03 per quarter dividend. A potential problem we see is that this dividend was raised twice in 2010.  This new $0.12 annualized payout comes to 0.95% in a current yield and Thomson Reuters has estimates of $0.96 EPS for 2011.  If any earnings hit comes from its operations in Brazil, Argentina, Chile, Mexico or Colombia, then this near-1% yield may suffer.  At $12.70, its 52-week trading range is $9.16 to $13.13.

Royal Gold, Inc. (NASDAQ: RGLD) just declared its second $0.11 quarterly dividend this morning and the $0.48 annual rate generates a yield of 0.97% with a $49.15 share price.  Its 52-week trading range is $42.15 to $55.22 and Thomson Reuters has annual June-2011 estimates of $1.29 EPS.  This Colorado-based company is a royalty play rather than a mining play and it owns many royalty interests in the U.S., South America, Australia, Russia, and elsewhere.

The Gabelli Global Gold, Natural Resources & Income Trust (NYSE: GGN) is a very different beast in the world of gold with a very high dividend.  It is a closed-end fund.  So far it has been able to maintain a $0.14 monthly payout to holders and that comes to an 8.9% yield to holders based upon an $18.80 price.  Keep in mind that it is not 100% gold, and its strategy to generate income is enhanced by writing covered calls.  The 52-week trading range is $14.86 to $19.77.  This is not a perfect gold play, but with a yield like this it may get a pass compared to others.

As you can tell, getting to even a 1% yield is a challenge in most gold mining stocks.  The underlying value here generally revolves around the price of gold.  Live by the golden sword and die by the golden sword.

JON C. OGG