Gold miners are sweetening their shareholder payouts in an attempt to lure investors as they dive back into the precious metal.
Barrick Gold Corp. and Newmont Mining Corp. two of the world’s top producers, announced increases to their dividends on Wednesday, while Goldcorp Inc. hinted a hike is in the works.
Gold companies traditionally have paid low dividends, but they’re stepping up payouts as they compete for investors in the precious metals industry.
More investors are turning to gold as a haven amid turmoil in global financial markets, which stems from worries about a replay of the last global recession.
What’s worrying for producers is that more investors are bypassing them for such gold-backed investments as exchange-traded funds. Some investors believe producers carry more risks, ranging from rising costs, to production and geopolitical issues, that could weigh on returns.
That puts more pressure on gold miners to improve their payouts, while at the same time trying to control costs and expand operations to fulfill growth expectations.
The pressure to pay dividends also increases for miners who make more profit when gold prices climb, as they have in recent days after falling by almost 20 per cent from a record of $1,923.70 (U.S.) an ounce in early September.
On Wednesday, gold futures hit a one-month high of $1,728, as fears mount that Europe’s debt crisis will not be easily resolved.
Barrick lifted its dividend by 25 per cent to 15 cents (U.S.) per share, which the company said is due to strong earnings and a positive outlook for the price of its key product. Barrick is expected to release its quarterly financial results before the market opens on Thursday.
In April, Newmont introduced a policy where, for every $100 increase in the gold price, the dividend increases 5 cents per share, for that quarter. Last month, it enhanced that return to steepen the curve at $1,700. On Wednesday, Newmont said it would increase its dividend by 17 per cent to 35 cents per share.
Newmont has the highest dividend among major gold equities. At Wednesday’s prices, its yield is about 2.1 per cent, compared with 1.2 per cent for Barrick and 0.85 per cent for Goldcorp.
Goldcorp Inc. said Wednesday it’s “setting the stage for increases in the dividend” in its current budgeting process.
Average gold prices of $1,719 per ounce in the third quarter helped Goldcorp report a 48-per-cent increase in third-quarter revenues to $1.3-billion, when compared to the same period last year.
Total cash costs were higher though, at $551 per ounce of gold produced, compared to $435 last year. Profit fell to $336-million in the third quarter, compared to $721-million for the same time last year. After adjustments for foreign-exchange losses, third-quarter profit was $459-million, or 57 cents per share. That compared to $244-million or $0.33 per share, in the third quarter of 2010.
Still, the company doesn’t feel pressure to introduce a gold-linked dividend, which has been a success so far for Newmont. “We prefer to look at the whole of the business and not just the revenue side,” said Goldcorp chief executive officer Chuck Jeannes.
Separately, base-metals miner Teck Resources Ltd. , benefiting from strong prices for copper and other metals, announced a 33-per-cent cent boost in its dividend to 40 cents a share.