The precious metals market is still in focus as we head into the spring, with gold futures (GCM24) closing out March by rising to yet another new record high. Similarly, silver futures (SIK24) have also started to gain some positive momentum, up 10% over the last month. Along with concerns over lingering inflation and geopolitical tensions, these price movements have been driven in part by a softer U.S. dollar.
Investors who are looking for ways to capitalize on the price action in precious metals, while also generating regular income, have often turned to dividend-paying mining stocks. These companies not only provide exposure to gold and silver prices, but also pay regular dividends to their investors - making them attractive options for income-seeking investors.
Here, we'll highlight two mining stocks that have received “Strong Buy” ratings from analysts, with room to run higher to their mean price targets from Wall Street. This suggests that not only do these stocks offer the potential for regular income through dividends, but they also have the ability to deliver significant capital appreciation. Read on to discover more about these compelling investment opportunities in the precious metals space.
1. Agnico Eagle Mines (AEM)
Agnico Eagle Mines (AEM) is a big name in Canadian gold mining, with its hands in projects from the frosty reaches of Canada to the sunny landscapes of Mexico. They've been making shareholders smile with a quarterly dividend of $0.40 per share, which adds up to $1.60 per share annually - giving AEM a forward yield of 2.77%.
AEM is up 8.7% on a year-to-date basis, and the shares have notched an impressive gain of 24% just in the past month.
Digging into their operations, AEM is mulling over an underground expansion at the Meliadine mine up in Nunavut, aiming to keep the gold flowing well past 2030. Plus, they've beefed up their portfolio by grabbing a cool 5.75 million shares in Prism Resources from Trevali Mining.
On the financial front, AEM flexed with a record gold production of 3.28 million ounces last year and an operating cash flow that soared over $2 billion. And in Q4, adjusted earnings of $0.57 per share comfortably beat analysts' expectations. For the full year, analysts expect AEM to report EPS growth of 3.1% to $2.30, followed by an increase to $2.62 in fiscal 2025.
Analysts are pretty bullish on AEM, with a consensus rating of "Strong Buy." Out of the 13 analysts offering recommendations, 9 suggest a “Strong Buy,” 3 suggest a “Moderate Buy,” and only 1 suggests a “Hold.”
The mean target price for AEM is $63.94, which represents potential upside of about 7.2% from the current price. The Street-high price target of $71 represents a potential upside of 19%.
2. Pan American Silver (PAAS)
Pan American Silver Corp. (PAAS) is a Canadian primary silver producer with a diversified portfolio of assets across Mexico, Peru, Canada, Argentina, and Bolivia. The company has maintained a consistent dividend payment history, though the dividend rate has fluctuated over time.
The company's current quarterly dividend rate is $0.10 per share. This translates to an annualized dividend rate of $0.40 per share and a forward dividend yield of 2.74%.
Like AEM, shares of PAAS have outperformed significantly over the past month alongside precious metals prices. The stock is up 23.5% over this time frame.
PAAS has been making some moves on the operational front too. They've got plans in the works to keep the silver flowing at their La Colorada mine down in Mexico by doing some extra exploration and development. Also, on March 4, they got the green light from the Toronto Stock Exchange (TSX) to buy back over 18.2 million of their own shares, which is about 5% of the outstanding amount at the end of February 2024.
Now, let's talk earnings; PAAS spilled the beans on their Q4 and full-year 2023 results on Feb. 22. For the fourth quarter, PAAS reported revenue of $669.6 million, which topped estimates, though the adjusted loss per share of $0.04 missed the mark. Looking ahead, analysts are targeting a full-year profit of $0.24 for fiscal 2024.
Analysts are generally bullish on PAAS, with a consensus rating of "Strong Buy." Based on 9 analysts offering recommendations, 7 suggest a “Strong Buy,” 1 suggests a “Moderate Buy,” and 1 suggests a “Hold.” The mean target price for PAAS is $20.19, representing an upside potential of approximately 33.8% from the current price.
The Bottom Line on Gold & Silver Mining Stocks
In a nutshell, dividend investors looking to get in on the precious metals action should definitely consider Agnico Eagle Mines (AEM) and Pan American Silver (PAAS). These two mining stocks are dishing out some sweet dividends, with analysts projecting significant potential upside. Investing in these mining stocks could be a solid way to score some passive income while gaining exposure to the rising gold and silver wave.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
