If you're on the hunt for income in this low-yield environment, I have just the industry for you. Not only are does it offer investors high current yields, but these payouts have also been heading higher in recent years. So, if you're prospecting for yield, it's time for you to start digging in to the mining industry.
Last year, the top 40 miners in the world increased dividend payments by 9% for a total payout of $38 billion, according to a recent report by PwC. Overall, dividends at the top 40 mining companies are strong across the board, with an average yield of around 3.7%. To help you on your journey, here are five top dividend payers worth a closer look as you explore for dividend gold.
Vale Brazilian iron ore miner Vale has already declared that it will pay out at least $4 billion in dividends to investors this year. That represents a total payment of approximately $0.78 per ADR, which implies a yield of around 5.3%. Unfortunately, that's down from the $6 billion or $1.17 per ADR Vale paid out last year and the massive $9 billion payout or $1.72 ADR it handed over to investors in 2011. Overall, though, Vale's payout is still well ahead of the $2.6 billion in dividends it averaged from 2007 through 2010. The key for Vale to get that dividend back to 2011 levels is rising iron ore prices, which represent 68% of its revenue. In the meantime, you are still paid very well to hold on to this stock.
Canadian gold miner IAMGOLD pays a semiannual dividend of $0.125 per share, which equates to a current yield of about 4.45%. As the company's name would imply, its revenues are generated by its gold-mining operations. Currently, the company has six gold mines across three continents as well as several potential projects in the works. The company's current priorities given the slumping gold market include cash preservation, cost reduction, and disciplined capital allocation. While the dividend looks safe for now, given the company's stated policy of not jeopardizing is strong balance sheet, it could be reduced if gold prices fall further.
Gold Footpath by George Hodan.
Anglo-Australian miner Rio Tinto has consistently grown its dividend over the past few years, and that trend isn't likely to end anytime soon. At more than 4%, the company's semiannual dividend is well covered by its diversified mining revenue. That being said, the miner has been hit by asset impairment-inspired losses after two major acquisitions failed to pan out as planned. These botched deals mean that Rio has a long comeback ahead of it as it tries to prudently grow while still rewarding shareholders with its generous dividend.
With a current yield of 4.05%, gold and copper miner Newmont Mining offers investors a top dividend yield. However, in light of falling gold prices, that dividend isn't likely to head much higher. Newmont has instead been conserving capital by cutting costs. Overall, spending is down 13% year over year, with capital spending taking the biggest hit, as it has been cut by 31%. While that will help the company's profitability, its dividend policy is tied to the price of gold. For you gold bulls out there, if prices rise above $2,000 an ounce, Newmont investors could see an annualized dividend of more than $3.00 per share, which would double the current rate.
Copper and gold miner Freeport McMoRan has endured a difficult year. It had to work hard to close its massive oil and gas acquisitions while also dealing with falling gold and copper prices. The only real solace for investors has been the company's 4.05% dividend. The good thing here for Freeport investors is that the oil and gas acquisitions take some risk out of its business as it reduces the company's exposure to mining from 100% down to 74%. The company believes it has the assets in place to maintain a strong balance sheet and continue its current dividend while also growing its business.
Final Foolish thoughts
The mining industry is filled with golden opportunities to add income to your portfolio. These five top-paying stocks offer a great place to start to a journey as you search for dividend gold.
One final thought: Many miners pay investors twice a year or have dividends that vary based on profits, which is why it's important that you understand the payout policy before committing any capital.
Finally, if you're looking for a good place to start, I'd suggest digging deeper into Freeport McMoRan. After putting together a blockbuster deal to expand into the oil and natural gas industry, Freeport-McMoRan certainly has plenty on its plate as it tries to adapt to the new industry, as expanding into oil and gas carries plenty of inherent volatility. That being said, the added diversity will help lessen the blow if copper and gold prices fall further. To help you start digging into Freeport-McMoRan, The Motley Fool has compiled a premium research report on the company. Simply click here now to access your copy today.
The article 1 Dividend-Focused Industry Keeps the Yields Growing originally appeared on Fool.com.
Fool contributor Matt DiLallo has no position in any stocks mentioned. The Motley Fool owns shares of Companhia Vale Ads and Freeport-McMoRan Copper & Gold. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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