What are we looking for?
Sustainable dividends from silver producers ready to profit from key industrial trends.
The screen
Silver, along with gold, has fallen in February after a sustained months-long rise. That recent dip reflects new stronger-than-expected U.S. job numbers, which suggest a longer period of rising interest rates may be needed to tame inflation.
Even so, we think top-quality silver stocks – that tap industrial and manufacturing growth, including the production of electric vehicle components – remain buys for income-focused investors.
The dividends of the most-successful silver miners should, in fact, rise alongside their ore output and cash flow. That’s regardless of the ebbs and flows of silver prices and inflation.
Our search started with silver producers with the mining strength to meet rising demand while keeping production costs low. We then applied our TSI Dividend Sustainability Rating System to those offering shareholders that dividend income. Our system awards points to a stock based on key factors:
One point for five years of continuous dividend payments – two points for more than five;
- 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 to cover dividends;
- One point if the company’s an industry leader.
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 six stocks. Hecla Mining Co., based in Coeur d’Alene, Idaho, produces silver, as well as gold, at its mines in the U.S, Canada and Mexico. Pan American Silver Corp., headquartered in Vancouver, focuses on silver mining – but also gold – in Canada, Mexico, Peru, Argentina and Bolivia. Another Vancouver-based producer, SSR Mining Inc. is a big industry player with mines in Turkey, the U.S., Canada and Argentina. Silvercorp Metals Inc., also headquartered in Vancouver, mines silver and other metals at its sites in China, while Vancouver firm First Majestic Silver Corp. is now reporting record silver output at its mines in Mexico and the U.S. And finally, Mexico’s Fresnillo PLC 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.
Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.
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Scott Clayton