Investors have started to agitate for more yield out of their resource stocks over the last couple of years, especially in gold. With 2012 looking like it could be another turbulent year for commodity stocks, the companies that focus on returning cash to shareholders could be rewarded for it. We look at a few that are doing just that.
BARRICK GOLD CORP. (ABX/TSX)
The world’s largest gold company is generating more than US$1-billion in earnings every quarter. Its operating cash flow was close to US$2-billion in its latest quarter. And once it finishes building the Pascua-Lama mine in 2013, its capital spending commitments could fall significantly, allowing it to return more cash to shareholders. Barrick has been raising its dividend over the last couple of years, but the yield is still under 1%. Investors punished the company in 2011 for its $7.3-billion acquisition of copper miner Equinox Minerals Ltd. in 2011, but the cash flow from that deal gives Barrick even more financial flexibility.
SILVER WHEATON CORP. (SLW/TSX)
Silver Wheaton is a cash flow machine. The company has an unusual business model in which it buys silver from producing mines for less than US$4.00 an ounce in exchange for up-front payments to the companies building the mines. Silver prices are currently around US$30 an ounce, which means that its margins are astronomical. Silver Wheaton was formed in 2004, and focused on growth in its early years. But yield has become a priority in recent months as well. In November, the company established a dividend policy that links the payout to operating cash flows.
CAMECO CORP. (CCO/TSX)
Is the uranium giant really only worth $7-billion? That is what the market is saying. It was a brutal year for Cameco: the stock got hammered in the post-Fukusima uranium equity meltdown, and the company lost a high-profile takeover battle for Hathor Exploration Ltd. The uranium market has stabilized, meaning that Cameco could emerge as a pure value play in 2012. Plus, the stock has fallen so far that the dividend yield has moved up to 2.2%, which is very respectable by Canadian mining standards.
Posted in: Outlook 2012 Tags: Barrick Gold Corp., Cameco Corp., Commodities, Commodity Stocks, Gold, Mining, Silver, Silver Wheaton Corp., Uranium
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