Top 3 Gold Dividend Stocks in 2015

Pro_Con_May_2_2015_WEB_volsky_imageThe top gold dividend stocks have maintained regular dividend distributions to shareholders, despite a 40% decline in gold prices since 2011. More impressive is that the gold stocks on this list have managed to cut costs and increase production—making them the top gold dividend stocks to watch in 2015.

1. Sibayne Gold Limited (NYSE/SBGL)

Sibayne Gold Limited, the largest gold producer in South Africa, has a market cap of $2.15 billion and annual dividend payments yielding four percent. Management has demonstrated the ability to navigate this downturn by maintaining production and by returning cash to shareholders.

For example, Sibayne actually increased capital expenditure plans for 2015 and is expected to produce 1.61 million to 1.67 million ounces of gold. At the top end of the range, production will be six percent higher than the 1.58 million ounces produced in 2014, or 18% more than the 1.42 million ounces produced in 2013. (Sibayne Investor Presentation, February 19, 2015.)

Moreover, Sibayne Gold has continued to stay profitable and pay dividends to shareholders. The company earned $176 million and $143 million in net income for 2013 and 2014, respectively. Sibayne’s management consistently returns anywhere from 25% to 35% of its earnings to shareholders. As a result, in 2014, its total dividend declared was 22% higher than 2013—making 2015 a promising year.

2. Franco-Nevada Corporation (NYSE/FNV)

Franco-Nevada Corporation, a gold royalty streaming company, pays $0.84 per share in dividends annually, yielding investors 1.6%. The firm does not mine the gold itself, but owns royalty rights in over 380 mining properties worldwide. About 50% of those properties are gold-focused, with the second largest category being oil and gas fields. (Source: FNV Annual Reports, March 25, 2015.)

In 2014, Franco-Nevada earned $442 million in revenue, 10% higher than in 2013. About three-quarters of that revenue came from gold royalty streaming; the remainder came from royalty claims on palladium, oil and gas, and other minerals. (Source: FNV Investor Relations, March 25, 2015.)

For 2015, Franco-Nevada expects to have claims on 335,000 to 355,000 gold equivalent ounces, up 14% from 293,000 gold equivalent ounces in 2014. Higher profitability allowed the board of directors to increase dividends for the eighth consecutive year. These are impressive results, given the 40% decline in the price of gold. The annual dividend for 2015 was raised by five percent to $0.84 per share, up from $0.80 in 2014.

3. Yamana Gold, Inc. (NYSE/AUY)

Yamana Gold, Inc., with nine producing mines across the Americas, including Canada, Brazil and Chile, maintains a dividend yield of 1.6% or $0.06 per share annually. The firm managed to increase production to 1.4 million gold equivalent ounces in 2014, up 17% from the 1.2 million ounces produced in 2013. (Source: AUY Investor Presentation, April 29, 2015.)

Another major catalyst for Yamana Gold is its low operating cost structure. The company achieved all-in sustaining costs with all expenditures related to an ounce of gold produced at $807.00 per ounce. Given that, as of May 1, 2015, gold trades at $1,183.00 an ounce. As you can see, Yamana’s production costs remain lower than prices.

In 2014, Yamana underwent restructuring; placing non-core assets into a fully owned subsidiary, which management is now trying to spin off. Non-recurring costs associated with Yamana’s reorganization forced operating income into the red. However, as of 2014 year-end, available cash and credit stood at $781 million—providing Yamana a cushion to continue dividend distributions in a challenging gold price environment. (Source: AUY Investor Presentation, April 29, 2015.)

Risks of Dividend-Paying Stocks

Despite the excellent track record of these dividend payers, there are risks with any investment: the possibility to lose money. Stocks with a sustainable dividend can be great long-term investments. However, short-term profitability can dictate how much the company is able to pay out to investors. Gold prices remain low and continue to strain company financials—making consistent dividend payment an onerous proposition. Always do your research and remember that historical results aren’t always indicative of future performance.