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What are we looking for?

Sustainable dividends from gold miners ready and able to cash in on the still-strong outlook for the precious metal.

The screen

The price of gold soared to its record high of US$2,063 in August, 2020. That was after pandemic-induced market volatility sent investors scrambling for gold as a haven.

The yellow metal has since pulled back around 13 per cent, but the conditions for a long-term rise of gold stocks remain in place. If inflation spikes over the next few years – driven by the reignition of economic growth and trillions of dollars in government stimulus spending – gold will attract even more interest.

We see gold-mining stocks as preferable to bullion and other forms of physical gold that come with carrying costs. We started our search with a list of U.S. and Canadian gold producers offering dividends. We then singled out those with strong production and cash flow, before applying our TSI Dividend Sustainability Rating System. It 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. The TSI Best ETFs for Canadian Investors is the latest. TSI Network is also affiliated with Successful Investor Wealth Management.

What we found

Select U.S. and Canadian gold producers

Ranking*CompanyTickerDiv. Sustain. RatingPointsDiv. Yld. (%)Mkt. Cap. ($ Bil.)**1Y Ttl. Rtn. (%) Recent Price ($)**
1Newmont Corp.NEM-NAverage63.845.7-14.557.71
2Barrick Gold Corp.ABX-TAverage61.844.0-38.224.44
3Agnico-Eagle Mines Ltd.AEM-TAverage52.517.3-37.470.66
4Kirkland Lake Gold Ltd.KL-TAverage51.814.5-23.154.82
5Yamana Gold Inc.YRI-TAverage42.85.2-35.55.37
6Alamos Gold Inc.AGI-TAverage41.33.9-25.39.90

Source: Dividend Advisor. *Ranking is determined by TSI Dividend Sustainability Score. Where overall points are the same, analysts considered P/E, dividend yield and industry outlook to decide final placements. **Share price and market cap are in native currency.

Our TSI Dividend Sustainability Rating System generated six stocks. While Denver-based Newmont Corp. has overtaken Toronto-headquartered Barrick Gold Corp. as the world’s No. 1 gold producer, both stocks make the grade. Meanwhile, the following four firms, also based in Toronto, offer solid prospects for savvy precious-metal investors: Agnico-Eagle Mines Ltd., Kirkland Lake Gold Ltd., Yamana Gold Inc. and Alamos Gold Inc.

We advise investors to do additional research on any investments we identify here.

Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.

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