In recent years, the U.S. government has made significant moves, pumping trillions into upgrading the nation's infrastructure as demand for safer and more efficient infrastructure rises. At the same time, as the world pivots toward cleaner energy solutions, nuclear power is anticipated to play a crucial role in this transition. Projections indicate that the global uranium market is expected to hit a whopping $3.3 billion by 2027, expanding at a compound annual growth rate of 3.6%.
With uranium (UXM24) powering the clean energy boom, prices are making a comeback - and alongside the construction materials driving infrastructure development, it might be an opportune time to load up on two related dividend-paying mining stocks, Vulcan Materials Company (VMC) and Cameco Corporation (CCJ), for passive income and growth.
Let’s take a closer look at these stocks.
Mining Stock #1: Vulcan Materials
With a market cap of over $34.9 billion, Alabama-based Vulcan Materials Company (VMC) is one of the largest producers of construction aggregates nationwide. It specializes in crushed stone, sand, and gravel. Its products play a crucial role in various construction endeavors, including developing and maintaining roads, bridges, waterworks, ports, residential and commercial buildings, hospitals, and more.
Vulcan Materials stock has surged 37.6% over the past 52 weeks, outperforming the broader S&P 500 Index’s ($SPX) 24.9% gains over the same time frame.
On March 18, Vulcan Materials paid its shareholders a quarterly dividend of $0.46 per share, a 7% jump from the previous quarterly dividend of $0.43 per share. The company’s chairman and CEO, Tom Hill, emphasized that this dividend increase reflects the company’s robust growth strategy, backed by its solid cash flow, financial stability, and dedication to enhancing shareholder returns.
The company’s annualized dividend of $1.84 translates to a 0.7% dividend yield. Furthermore, the company maintains a conservative dividend payout ratio of 24.5%, which allows sufficient flexibility for growth initiatives and potential dividend enhancements in the future.
In terms of valuation, the stock is trading at 31.28 times forward earnings and 4.49 times sales. Its price/earnings to growth ratio of 1.98x is lower than its peer, Martin Marietta Materials (MLM), which trades at 2.80x.
On May 2, Vulcan Materials shares climbed 1.8% after the company announced its Q1 results, which topped Wall Street’s projections on both the top and bottom lines. The company reported total revenue of $1.6 billion, surpassing Wall Street’s estimates by 2.3%. Its adjusted EPS of $0.80 also topped Street estimates by 5.3%.
During the quarter, the company also returned approximately $81 million to its shareholders, including $19 million for common stock repurchases and $62 million for dividends.
Management anticipates the company’s adjusted EBITDA to range between $2.2 billion and $2.3 billion in fiscal 2024, marking the fourth consecutive year of double-digit growth. Also, Vulcan foresees investing between $625 million and $675 million in maintenance and expansion projects.
Analysts tracking Vulcan Materials expect the company’s profit to reach $8.50 per share in fiscal 2024, up 21.4% year over year, and grow another 14.7% to $9.75 per share in fiscal 2025.
Vulcan Materials stock has a consensus “Moderate Buy” rating. Out of the 18 analysts offering recommendations for the stock, 12 recommend a “Strong Buy,” one suggests a “Moderate Buy,” and the remaining five analysts give a “Hold” rating.
The average analyst price target of $281.69 indicates a potential upside of just 5.8% from current price levels. However, the Street-high price target of $322 suggests a notable 21% upside potential.
Mining Stock #2: Cameco Corp
Canada-headquartered Cameco Corporation (CCJ) supplies uranium for electricity production and operates through three segments: Uranium; Fuel Services; and Westinghouse. With a market cap of over $21 billion, the company provides various nuclear fuel products and services across the fuel cycle to enhance the supply of clean, reliable, secure, and affordable energy.
Shares of Cameco have rallied 83.9% over the past 52 weeks, eclipsing the broader SPX’s gains during the same period.
The company’s annualized dividend of $0.09 translates to a 0.18% dividend yield. Moreover, by upholding a modest payout ratio of 14.9%, the company prioritizes directing its earnings toward growth endeavors, thereby securing ample resources for future investments.
Priced at 35.34 times forward earnings, the stock is trading much lower than its own five-year average of 305.86x.
The company reported a Q1 revenue of C$634 million ($463.2 million) on April 30, while its adjusted EPS stood at C$0.13. Its gross profit and adjusted EBITDA came in at C$187 million ($136.6 million) and C$345 million ($252.1 million), respectively. As of March 31, it had C$323 million ($236 million) in cash and cash equivalents.
While commenting upon the company’s Q1 performance, Cameco’s president and CEO, Tim Gitzel, highlighted that the strong operational performance across the uranium, fuel services, and Westinghouse segments during the quarter were in line with the company’s fiscal 2024 outlook.
For fiscal 2024, management anticipates strong cash flow generation, with estimated consolidated revenue ranging between C$2.9 billion ($2.1 billion) and C$3 billion ($2.2 billion). Moreover, the outlook for the company's share of Westinghouse’s 2024 adjusted EBITDA remains consistent, projected between C$445 million ($325.1 million) and C$510 million ($372.6 million).
Meanwhile, analysts tracking Cameco expect the company’s profit to reach $1.37 per share in fiscal 2024, up 140.4% year over year, and grow another 16.1% to $1.59 per share in fiscal 2025.
Cameco stock has a consensus “Strong Buy” rating. Out of the 12 analysts covering the stock, nine recommend a “Strong Buy,” two suggest a “Moderate Buy,” and the remaining one analyst gives a “Hold” rating.
The average analyst price target of $56.40 indicates potential upside of 11.2% from current price levels. The Street-high price target of $68 suggests the stock could rally as much as 34.1%.
On the date of publication, Sristi Suman Jayaswal 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.
