Yamana Just Became 50% More Interesting
With a huge tip of the Fool's cap to David in Qatar (whereaminow) for cracking me up with his use of percentages (someone please link to his post in a comment below if you know which one I mean -- I couldn't find it this morning, but it was hilarious). Anyway, when drumming up ideas for how to approach Yamana's latest announcement if a 50% dividend hike and -- even more bullishly -- a 25% exploration budget hike, the juxtaposition of arbitrary, subjective percentages with factual ones seemed like perfect fodder. Thanks D-in-Q!
Yamana Gold Just Became 50% More Interesting
A 1.5% yield may not sound like much of a windfall just yet, but it is 83% better than that of larger rival Goldcorp (NYSE: GG ) , and I believe Goldcorp will now feel at least 20% more compelled to re-raise its own payout. After all, Newmont Mining (NYSE: NEM ) recently upped its dividend by 33% to yield 1.5%, and Newmont boasts nowhere near the sort of production growth profile that makes Goldcorp such a prominent force in the industry.
Offering further enticement, Newmont has adopted an innovative dividend strategy that will see its quarterly payout raised $0.05 per share for every $100 increase in its realized sales price for gold. While Newmont may be the first to spell it out in an explicit formula, I feel 60% certain that 75% of gold mining executives have contemplated similar dividend increases to correspond with the rising price of gold.
But wait; there is 25% more to this story. You see, after a tremendously successful year of exploration in 2010 -- which yielded a 23% expansion of the company's gold reserves (net of production) before the strategic sale of Agua Rica-- Yamana has decided to hike its 2011 exploration budget by 25% to reach an impressive $105 million campaign. I personally ascribe a 100% likelihood of additional exploration success for Yamana, and I look to that same organic growth potential as a likely catalyst to lessen the stock's 60% discount to my fair value estimate of $30 per share.