# Lifestyles & Discussion > Personal Prosperity >  I´m searching for gold miners that peg dividends to gold prices

## swissaustrian

I want to generate some cash flow from my pm investments.
Therefore i´m searching for gold mining companies that peg their dividends to the price of gold.

I only know one: NEM.
Do you know others?

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## cubical

I believe they are the only ones.

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## swissaustrian

I´m sure there are others i just can´t remember...

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## swissaustrian

Ok here is a similar strategy: Yamana Gold (AUY)
http://www.fool.com/investing/genera...ng-for-di.aspx
They already went ballistic.

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## Seraphim

I've noticed that Newmont pegs it's dividend at 30cents a share, QUARTERLY.


So 10 shares would yield 3 dollars every 3 months?

Seems awefully low. The shares are 55$ a pop. 

At this point I'm more inclined to buy silver to continue building a solid core of savings/investment.

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## swissaustrian

> I've noticed that Newmont pegs it's dividend at 30cents a share, QUARTERLY.
> 
> 
> So 10 shares would yield 3 dollars every 3 months?
> 
> Seems awefully low. The shares are 55$ a pop. 
> 
> At this point I'm more inclined to buy silver to continue building a solid core of savings/investment.


Yep, yield is 2,1% annually. Quite poor.
That´s why i´m searching for higher yields.

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## Seraphim

What's a more "normal" annual yield for a dividend?




> Yep, yield is 2,1% annually. Quite poor.
> That´s why i´m searching for higher yields.

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## swissaustrian

> What's a more "normal" annual yield for a dividend?


Mining shares usually aren´t dividend stocks, because this market is in the growth phase.
consumer stocks, utitilities, telecommunications, oil, tobacco, and some insurances offer yields of 5%-7% right now. Some even higher.

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## Seraphim

Ok cool - I figured 6% was probably around average.

Thanks - I think I will buy some Newmont at some point soon. I don't see how their gold priced dividends will go anywhere but up.




> Mining shares usually aren´t dividend stocks, because this market is in the growth phase.
> consumer stocks, utitilities, telecommunications, oil, tobacco, and some insurances offer yields of 5%-7% right now. Some even higher.

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## cubical

Look at MLPs for yield and some commodity exposure.

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## swissaustrian

> Ok cool - I figured 6% was probably around average.
> 
> Thanks - I think I will buy some Newmont at some point soon. I don't see how their gold priced dividends will go anywhere but up.


6% for the big blue chips, yes.
I´m thinking about accumulating NEM too. Probably the stock is going to fall with the gold price for a couple of days. Then we might see a good entry point.
The quarterly Dividend will be priced in on 9-6 (ex-dividend date).

Analyst opinion is this:
Strong buy:8
Buy: 2
Hold: 6
Sell: 0
Strong sell: 1
Latest revisions:
0 Upgrades
0 Downgrades

P/E 12, probably this estimation is too high, because analysts didn´t expect the surge in gold prices.

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## swissaustrian

> Look at MLPs for yield and some commodity exposure.


If i type in MLP i get: Maui Land&Pineapple (DCT)?

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## cubical

> If i type in MLP i get: Maui Land&Pineapple (DCT)?


Master Limited Partnerships. They offer tax advantages and huge distributions to US citizens. I am unsure how it works if you are overseas.

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## swissaustrian

> Master Limited Partnerships. They offer tax advantages and huge distributions to US citizens. I am unsure how it works if you are overseas.


Ok thanks.

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## jclay2

Don't invest in miners. Please listen to my advice. Physical metal in your possession has outperformed the miners and with LESS RISK. You should only own specific miners if you have a large base of physical and are ready to pour over financials to find a gem amongst the rubble.

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## libertybrewcity

NEM raises its dividend 10 cents everytime gold rises $100. If gold stays around 1800, the dividend will be at 50 cents next quarter.

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## swissaustrian

> Don't invest in miners. Please listen to my advice. Physical metal in your possession has outperformed the miners and with LESS RISK. You should only own specific miners if you have a large base of physical and are ready to pour over financials to find a gem amongst the rubble.


I own quite a bit of physical and miners are just 5% of my portfolio as stocks only make 10-25% of it. I´ve done pretty well with them. (e.g. SLW, RGLD)
Some mining shares are totally undervalued right now. The surge in the price of gold hasn´t been priced in so far. see here
: 
In order to generate some cash flow, mining shares that pay dividends are a good pick for me. Especially because hedge funds often use the long metals, short miners trade. Some companies are set up to have massive short squeezes. Look at what happened to Yamada Gold.
Surely, you have to do your homework and analyze the single company.

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## Nic

The great thing about dividend investing is that even though you may only be getting 2% right now, as time goes on and the stock price goes up, so does the dividend. In time, that dividend may wind up yielding 7 or 8% of your original investment.

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## llepard

Check out Gold Resources, ticker GORO.  They commit to pay out a meaningful percentage of cash flow which is effectively a peg to the gold price.  I own it.  Their deposit is very rich.  Management is good.  It is fairly priced. (not cheap, fair). I think it will be a popular stock due to dividend policy.

LL

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## swissaustrian

> Check out Gold Resources, ticker GORO.  They commit to pay out a meaningful percentage of cash flow which is effectively a peg to the gold price.  I own it.  Their deposit is very rich.  Management is good.  It is fairly priced. (not cheap, fair). I think it will be a popular stock due to dividend policy.
> 
> LL


Thanks, Larry!
The dividend policy really sounds interesting:



> GRC is proud to have declared its initial $0.03 per/share "special" cash dividend July 31, 2010, just 30 days after declaring commercial production, and distributed consecutive monthly "special" dividends totaling $0.18 per/share returned back to the shareholders of the Company in 2010. The Company targets long-term dividend distributions of approximately 1/3 of cash flows.


http://www.goldresourcecorp.com/overview.php

What about the role of Mexican unions in mining? From what I know they´re causing some trouble for the companies, but it´s not as bad as in South Africa?

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## libertybrewcity

^mining companies in Mexico are sketchy investments because they have a history of nationalization.

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## swissaustrian

> ^mining companies in Mexico are sketchy investments because they have a history of nationalization.


As Carlos Slim is probably more powerful than the whole Mexican gov., i don´t expect any nationalization moves soon. He is substancially exposed to the mining sector (see e.g. here http://www.istockanalyst.com/article...icleid/4911999 ) and would suffer from that.
Therefore my main concern are the unions.

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## swissaustrian

After doing some research on GORO, I found this controversy between GORO and an author from Barrons who basicly claims that the company is a fraud. See here:
http://online.barrons.com/article/SB...Tabs%3Darticle
Defense by the company: http://www.prnewswire.com/news-relea...125017169.html

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## QE Is Theft

Swissaustrian, do you live in die Schweiz?

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## swissaustrian

> Swissaustrian, do you live in die Schweiz?


Yes.

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## QE Is Theft

I envy you. 

Switzerland is the best/most beautiful country in the world.

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## Arklatex

Ramelious Resources is my favorite Gold Miner and they surprised me last year with a 2% dividend, more than any other miner I'm aware of at the moment which is unusual because they are a lot smaller, by far, than the Newmonts and Barricks.   My favorite management, makes right decisions, has growth AND yields.   What more could I want?

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## llepard

> After doing some research on GORO, I found this controversy between GORO and an author from Barrons who basicly claims that the company is a fraud. See here:
> http://online.barrons.com/article/SB...Tabs%3Darticle
> Defense by the company: http://www.prnewswire.com/news-relea...125017169.html


Barron's article was a smear.

Mexico confiscation is not too likely.  However, security is an issue.  Drug business is stealing trucks, etc.  Co. has good security.

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## swissaustrian

> Barron's article was a smear.
> 
> Mexico confiscation is not too likely.  However, security is an issue.  Drug business is stealing trucks, etc.  Co. has good security.


This author from Barron´s probably shorted the hell out of GORO before publishing his article.
Do you have some information on the role of unions in the Mexican mining business? I´ve heard that it´s a challange to deal with unions in Mexico, but that it´s not as bad as in South Africa...

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## Inflation

I'll be grabbing Gold Resource shares ASAP.

Doing so breaks my rule against investing in production outside of NATO.

But I've already made an exception for EXK, and it's been my fastest horse.

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## JasonC

I got into GORO about 3 weeks ago at about 24$ a share... just in time to receive their special dividend.. I'm not sure if I want to hold onto this one for a while or sell around 29-31$ range. I like the dividend, and the management seems to be pretty darn good. They had great (record breaking) production results despite a storm tht took their mine out of operation for some time. They even converted some of their cash into a bunch of physical gold (and maybe silver too..i forget) to add to their assets.

And, yeah, I looked into the article for Barron's and it does just seem to be a smear job, but I am unsure of the modus operandi of the author.

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## JasonC

On the subject of miners.. I'm not quite sure if I want to get out of miners and into more physical at the moment or just ride out this storm. If the markets crash hard the miners will probably be brought down with it for a short period of time until people realize how undervalued some of them are with PM prices reaching such nominal highs. I'll most likely just ride out the storm and hold the miners I like most. Has anyone sold their miners in anticipation of the prices going lower from the markets crashing? IMO, I think its safer to hold the miners, because people will have tons of cash from selling their stocks and there will be so few places people will be willing to put it. PMs and miners will be looking very attractive to a lot more people soon..

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## llepard

> On the subject of miners.. I'm not quite sure if I want to get out of miners and into more physical at the moment or just ride out this storm. If the markets crash hard the miners will probably be brought down with it for a short period of time until people realize how undervalued some of them are with PM prices reaching such nominal highs. I'll most likely just ride out the storm and hold the miners I like most. Has anyone sold their miners in anticipation of the prices going lower from the markets crashing? IMO, I think its safer to hold the miners, because people will have tons of cash from selling their stocks and there will be so few places people will be willing to put it. PMs and miners will be looking very attractive to a lot more people soon..


Do not sell the miners.  They are at EPIC levels of undervaluation relative to the metal.  Fortunes will be made in the next few years by buying the miners.  The metal will go much higher but it is presently 22% above its 200 day moving average.  If you feel the need to do something at the margin sell a little spot gold and use the proceeds to buy the quality miners.

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## swissaustrian

> Do not sell the miners.  They are at EPIC levels of undervaluation relative to the metal.  Fortunes will be made in the next few years by buying the miners.  The metal will go much higher but it is presently 22% above its 200 day moving average.  If you feel the need to do something at the margin sell a little spot gold and use the proceeds to buy the quality miners.


Seems like the market finally realizes this epic undervaluation of the miners:

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## Gatersaw

Do you guys have a trading group where we can submit equities or trade setups in real time?

I'm looking at MA Mastercard is setup for a bounce off the bottom of a daily channel with great fundamentals. They are on the canslim net buy list as well so this is a great opportunity with a tight stop to bank 10% gains in 2-3 weeks although with The Ben Bernank putting market on pause perhaps the turnaround will be delayed and we will be forced to hedge some SPY if QE3 is mentioned at >500billion on Friday.

Mr Lepard thank you for that information. I've been looking for someone intelligent to say something objective about the comparison between miners and physical. I was going to pull the trigger on AUY last week but the rumor that margins are going to hike at CME scared me off. 

I see a spike in volume here that might indicate that very fear that CME will hike margins. Perhaps we get miners at a bargain in 2 weeks?

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## Zippyjuan

To be able to pay a dividend based on a rise in the price of gold, an investment would have to physically sell their gold. Or have some sort of futures contracts set up. If gold goes down do you owe them a rebate? Kind of like getting a dividend based on the value of a stock. A firm could budget for a certain rise in the price in their dividend, but a bigger than expected rise could wipe them out (or at least their cash available to pay out in dividends).

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## swissaustrian

Miners are still looking very attractive:

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## The Binghamton Patriot

> I want to generate some cash flow from my pm investments.
> Therefore i´m searching for gold mining companies that peg their dividends to the price of gold.
> 
> I only know one: NEM.
> Do you know others?


Thats a rare find for the industry.  If you want a firm that throws off some dividends, you aren't going to find it in PM Miners. You should try a mid cap contract driller, or maybe an industrial manufacturer.

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## swissaustrian

> Thats a rare find for the industry.  If you want a firm that throws off some dividends, you aren't going to find it in PM Miners. You should try a mid cap contract driller, or maybe an industrial manufacturer.


That´s not what I´m searching for. I own some blue chips (telecommunications, food, utilities, oil etc.) with yields arround 5-9%. 
My goal is to find miners. Their dividend growth rate will be impressive over the next years.

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## cubical

I am really liking my NEM right now. Never got a chance to buy ABX in the 40s. I have maxed out my IRA contributions so far this year, hopefully next year I will have a chance to get it "cheap".

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## The Binghamton Patriot

> That´s not what I´m searching for. I own some blue chips (telecommunications, food, utilities, oil etc.) with yields arround 5-9%. 
> My goal is to find miners. Their dividend growth rate will be impressive over the next years.


Ok, well, like I said, you're probably not going to find one that throws off a significant portion of their cash flows to investors; especially one that ties their divs to gold prices.  That would be suicide from an internal perspective. Why? because most of the  miners take their cash flows and re-invest them into future exploration and concomitant operations.  Increased margins due to higher spot/ future prices would obv be good for any miner, but why would a miner want to tie up future cash flows like that? Especially when theres ample opportunity for growth.  Where you will make money on a miner is the capital appreciation.   Your best bet IMHO if you want a dividend from a miner is to take a look at a large cap mineral miner, like a Rio Tinto or a Freeport McMoran.  Freeport's main business is copper, but they also mine other minerals, and pay a decent divided.

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## swissaustrian

> I am really liking my NEM right now. Never got a chance to buy ABX in the 40s. I have maxed out my IRA contributions so far this year, hopefully next year I will have a chance to get it "cheap".


NEM outperformed ABX over the last few weeks. Seems like ABX needs to increase it´s dividends to become more attractive to investors. 
ABX´s and NEM´s book values are both ridiculously low given their gold reserves.

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## swissaustrian

> Ok, well, like I said, you're probably not going to find one that throws off a significant portion of their cash flows to investors; especially one that ties their divs to gold prices.  That would be suicide from an internal perspective. Why? because most of the  miners take their cash flows and re-invest them into future exploration and concomitant operations.  Increased margins due to higher spot/ future prices would obv be good for any miner, but why would a miner want to tie up future cash flows like that? Especially when theres ample opportunity for growth.  Where you will make money on a miner is the capital appreciation.   Your best bet IMHO if you want a dividend from a miner is to take a look at a large cap mineral miner, like a Rio Tinto or a Freeport McMoran.  Freeport's main business is copper, but they also mine other minerals, and pay a decent divided.


I should have said that I´m specificly searching for GOLD miners (as emphasized in the op). And there are some that use arround 25% of their cash flow for dividends.
I wouldn´t buy base metal miners right now. 
Copper, coal, and iron ore are all poised to plunge. 50% of demand comes from China and China doesn´t look good at all (see here: http://www.zerohedge.com/news/here-i...-europe-report ). But if I´d buy base metal miners, I´d prefer BHP over Rio Tinto. They have a better profitability and their portfolio offers a broader diversification due to their exposure to oil and nat gas.

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## swissaustrian

> *Gold paying dividends*
> Peter Koven Oct 21, 2011 – 4:13 PM ET | Last Updated: Oct 25, 2011 11:09 AM ET
> Gold mining investors got two interesting pieces of news to chew on this week. One demonstrated why equities have largely underperformed the gold price over the last few years, and the other showed one way that trend could potentially end.
> The bad news came from Agnico-Eagle Mines Ltd., which stunned the street on Wednesday by shutting down its Goldex mine because of rock stability problems. As Agnico shares tumbled 18%, investors couldn’t help but wonder: Why buy gold stocks when the exchange-traded funds have much less risk? The Goldex debacle seemed to embody everything wrong with the miners, who are creating little shareholder value despite record profits.
> The positive news got a lot less attention. *On Monday, Eldorado Gold Corp. announced an enhancement to its dividend policy that links the payout more closely to the gold price. The company demonstrated that its dividend per ounce of gold sold will rise progressively from US$100 (when gold is less than US$1,549 an ounce) to US$225 (when gold reaches US$1,850).*
> *The price-linked dividend is a smart strategy, experts say, because it attracts yield-seeking investors while forcing reluctant miners to part with more of their cash when gold prices go up.*
>  “The reality is that gold mining companies have been criticized, and rightfully so, for not [offering] what people look for in real businesses. And that is yield,” Eldorado chief executive Paul Wright says.*
> “The fact that there has been such demand for ETFs is largely a reflection of the inability of gold mining companies to provide an alternative in terms of yield.”*
> Gold miners have been raising their dividends over the past year, but they are still nominal at best. Most senior producers pay a yield between 0.5% and 1.5%, which has not been enough to draw new investors. Mr. Wright’s view is that a level of about 2% would be taken more seriously, and it would provide a genuine advantage for equities that you can’t get from ETFs.
> ...


http://business.financialpost.com/20...ing-dividends/

EDIT: *Barrick raised their quarterly dividend today...*

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## swissaustrian

> Get Your *Dividend in Bullion Instead of Cash**
> If you had the chance to take a dividend in physical bullion rather than cash, would you do it? One company is taking steps to make that happen.*
> *In August, Gold Resource Corp. (AMEX: GORO) announced it was beginning to mint its first tranche of one-ounce gold and silver coins. The company also announced that it plans to keep physical gold and silver in its treasury as opposed to just cash. The reason is that the company plans to increase its holdings so at some point it can offer shareholders the ability to receive dividends in physical gold and silver.*
> This move is the latest in metals companies instituting novel dividend policies. Both Hecla Mining (NYSE: HL  ) and Newmont Mining (NYSE: NEM  ) peg their dividends on realized metal prices. Other silver and gold companies also pay dividends, though theirs are more straightforward.
> Investors have been attracted to gold because of uncertainty, countries' actions to devalue their currency in the face of massive deficits and debt levels, and the relative ease of getting gold exposure through exchange-traded funds versus physical gold.
> *Paying out dividends in metals would have some complications. For one, you would need some sizable holdings to actually receive gold. Gold Resource Corp. said in its press release that metals would only be offered to shareholders who meet a certain minimum position.* At yesterday's price, an ounce of gold is worth $1,694 and an ounce of silver is worth $32.515. Assuming recent prices, physical dividends, and an annual dividend, you would need to own the following amounts to get a one-ounce gold or silver coin.
> [Table left out see link]
> As you can see, *you would need a pretty sizable holding in any of these stocks to get an ounce of gold, though it's much less for silver. However, the chart doesn't recognize that there would also probably be shipping and storing costs, which would eat into your dividend.*
> With all that said, would you be more interested in investing in a gold stock if it paid out physical dividends?
> Take the Motley Poll


http://www.fool.com/investing/genera...d-of-cash.aspx

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