Caledonia Mining Corporation PLC Pays Nearly 4% Dividend Yield (CMCL)
By: Ned Piplovic,
The recent market volatility has sent many investors seeking to diversify their portfolios away from equities and into alternative sectors.
One of those alternative sectors is precious metals and it offers many options. Most investors will go the usual route and increase their position in physical gold bullion, invest in a gold exchange-traded fund (ETF) or take a position in one of the precious metals mining companies.
The investors who choose mining companies have the chance to pick among well-known ones. Those options include Newmont Mining Corporation (NYSE:NEM), Barrick Gold (NYSE:ABX) and the Franco-Nevada Corporation (NYSE:FNV), which Paul Dykewicz mentioned in his most recent investment column as the largest holdings in the VanEck Vectors Gold Miners ETF (NYSEArca:GDX).
However, investors looking for diversification opportunities slightly off the beaten path also should consider the Caledonia Mining Corporation PLC (NYSE:CMCL). This company’s share price survived the recent market volatility virtually unscathed and its current 3.8% dividend yield outperformed the yields of all but one of the 16 dividend-paying companies in the Gold Mining market segment.
However, investors interested in buying this stock should conduct their research quickly and take a position prior to the company’s April 12, 2018, ex-dividend date to ensure eligibility for the dividend distribution on the upcoming pay date, which is set for April 27, 2018.
Caledonia Mining Corporation PLC (NYSE:CMCL & TSE:CAL)
Caledonia is a mining, exploration and development company with a focus on exploration in Southern Africa. The company’s primary asset is a 49% interest in the Blanket Mine in Zimbabwe. In 2010, the company finished a capital investment project which nearly doubled Blanket Mine’s production output from 24,000 ounces to 40,000 ounces of gold per year. The company completed another investment round of $65 million between 2014 and 2017, funded from Blanket’s internally generated cash, and is expected to increase gold production progressively to 80,000 ounces per year by 2022.
The existing Blanket metallurgical plant has surplus capacity and should be able to manage easily the additional production volume with only moderate capital investments. Originally based in Canada, the company relocated its headquarters to Jersey, Channel Islands in 2016 and has additional management offices in Johannesburg, South Africa and London, United Kingdom.
The Caledonia Mining Corporation started paying dividends in February 2012, which was 6 Canadian cents per year at the time. As of 2016, the company switched to paying dividends and announcing its financial results in United States Dollars – instead of Canadian Dollars. In the third quarter of 2016, the company boosted its quarterly dividend payout 22% from 1.125 cents to 1.375 cents per share. Additionally, because of a one-for-five share price consolidation in July 2017, the company revised its quarterly dividend five times higher to the current 6.875 cents per share.
The current 6.875 cents per share dividend distribution is equivalent to a 24.5 cents annualized dividend and yields 3.8%. Currently, the Caledonia Mining Corporation’s 3.8% dividend yield is 54% above the 2.47% average yield of the entire Basic Materials sector and 275% higher than the 1% simple average of all the companies in the Gold Mining market segment. Even compared to just the companies that distribute dividends, Caledonia’s current yield is the second highest and 188% above the 1.32% average yield of only dividend-paying companies in the segment.
In addition to the above-average dividend yield, the company’s share price provided a gradual and steady growth over the past few years. The share price fell from $6.95 at the beginning of the trailing 12-month period and declined 25% before reaching its 52-Week low of $5.23 by October 26, 2017. However, the share price needed less than one month to recover all those losses and spike 46.5% before its achieved its 52-week high of $7.66 on November 29, 2017.
After the November peak, the share price pulled back just 5.5% and closed on April 3, 2018, at $7.24. This closing price was 4.2% higher than it was one year earlier and is more than 38% above the 52-week low from late October 2017 and 23% higher than it was five years prior.
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