Angelika Warmuth/Reuters
What are we looking for?
Sustainable dividends from silver miners set to extend their gains well beyond today’s bullish market.
The screen
Silver jumped to over US$44 an ounce this week – a 14-year high. (It achieved its all-time high of $49.51 in April, 2011.)
Like its yellow metal counterpart, silver’s appeal as a safe harbour for investors has jumped with geopolitical uncertainty, high government debt levels, inflation fears and a weaker U.S. dollar. Silver, in particular, also benefits from industrial and manufacturing demand. The metal is prized as an electrical conductor for computer chips, including those fuelling today’s boom in artificial intelligence.
Our analysts at The Successful Investor think top-quality silver miners are well positioned to hang on to today’s gains and expand them even if an economic slowdown zaps some industrial demand.
Our search started with silver producers able to meet current and rising demand for ore while keeping their production costs low and cash flow high. We then applied our TSI Dividend Sustainability Rating System to those companies offering shareholders dividend income. Our system awards points to a stock based on key factors:
- Two points if it has raised the payment in the past five years
- One point for management’s commitment to dividends
- One point for operating in non-cyclical industries
- One point for limited exposure to foreign currency rates and freedom from political interference
- Two points for a strong balance sheet, including manageable debt and adequate cash
- Two points for a long-term record of positive earnings and cash flow sufficient to cover dividend payments
- One point for an industry leader
- One point for five years of continuous dividend payments
- Two points for more than five
Companies with 10 to 12 points have the most secure dividends, or the highest sustainability. Those with seven to nine points have above-average sustainability; average sustainability, four to six points; and below-average sustainability, one to three points.
More about TSI Network
TSI Network is the online home of The Successful Investor Inc. – the group of widely followed Canadian investment newsletters by editor and publisher Pat McKeough. They include our award-winning flagship newsletter, The Successful Investor, and the TSI Dividend Advisor. TSI Network is also affiliated with Successful Investor Wealth Management.
What we found
Our TSI Dividend Sustainability Rating System generated five stocks. Pan American Silver Corp. PAAS-T, headquartered in Vancouver, focuses on silver mining – but also gold – in Canada, Mexico, Peru, Argentina and Bolivia. Silvercorp Metals Inc. SVM-T, also headquartered in Vancouver, mines silver and other metals at its sites in China, while another Vancouver firm, First Majestic Silver Corp. AG-T, is now reporting record silver output at its mines in Mexico and the U.S.
Hecla Mining Co. HL-N, based in Coeur d’Alene, Idaho, produces silver, as well as gold, at its mines in the U.S, Canada and Mexico.
And finally, Mexico’s Fresnillo PLC FNLPF is one of the world’s largest producers of silver. Please note that the low dividend yield of many silver miners reflects heavy reinvestment of cash flow into exploration and development. That only helps to bolster future shareholder income.
We advise investors to do additional research on investments we identify here.
Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.