Newmont Mining Corp. (NYSE:NEM) announced a quarterly dividend of 7.5 cents per share July 19. The quarterly dividend that Newmont Mining will distribute to its shareholders for the third three months of the year represents a 50% and 200% increase from the quarterly dividend that the largest U.S. gold producer paid to its shareholders for the second quarter and for the comparable quarter of 2016.
The dividend will be paid on Sept. 28 to shareholders of record as of Sept. 14.
The quarterly dividend of 7.5 cents per share will lead to a 12 trailing months dividend of 30 cents per share in one year's time if gold trades between $1,250 and $1,299 per troy ounce on average over the next three quarters. The annual dividend of 30 cents leads to a dividend yield of 0.89% according to Newmont Mining’s latest market value per share on the New York Stock Exchange.
The entity of the quarterly dividend is at Newmont Mining's board of directors' discretion and depends on future prices gold to take per troy ounce on the bullion market at the end of the afternoon negotiations as shown in the picture below.
With the yellow metal set to uptrend over the remaining part of fiscal 2017, due to the existence worldwide of economic and geopolitical conditions that are positive for the commodity, Newmont Mining will likely continue distributing part of its free cash flows to its shareholders, also over the coming quarters.
With gold trading on average above $1,250 per troy ounce over the third quarter of fiscal 2016 ($1,334.82 per troy ounce on average) and the second quarter of fiscal 2017 ($1,256.96 per troy ounce on average), Newmont Mining increased its quarterly dividend by 100% from 2.5 cents for the third quarter of fiscal 2016 to 5 cents for the fourth quarter of 2016 and by 50% from 5 cents for the second quarter to 7.5 cents for the third quarter of fiscal 2017. This worked as a catalyst to the U.S. gold stock that constantly outperformed the Market Vectors Gold Miners ETF (GDX, Financial) year to date and over each of the four subperiods since the beginning of fiscal 2017 as shown by the picture below.
Newmont Mining may also gain some traction from the next earnings announcement.
On the ground of an average gold price of $1,256.96 per troy ounce for the second quarter – lower nearly $2.4 per troy ounce than the average price of the comparable quarter of 2016 – analysts have reduced their estimates on EPS with 3 cents for the second quarter of fiscal 2017 compared to their estimates on EPS for the comparable quarter of 2016.
Therefore, Newmont Mining will likely beat analysts’ expectations on second-quarter EPS resembling what happened last year when the miner beat analysts’ expectations on second-quarter 2016 EPS by 14 cents and producing a positive surprise of 46.70%, even though the company has probably produced the precious metal at a higher AISC per ounce compared to the same quarter in 2016.
For the second quarter, which ended June 30, analysts forecast that Newmont Mining will close the quarter with an EPS of 27 cents on average. This is a mean of 16 estimates of analysts, who were surveyed on the basis of revenue that for the quarter in question is forecasted to come in at $1.78 billion on average.
Newmont Mining may beat analysts' expectations on second-quarter EPS producing a positive surprise ranging between 11.11% and 51.85%, as shown by the calculations that are in the picture below.
In the above calculations, I assume that one ounce of gold equates to a number of 408 shares of Newmont Mining , according to the quarterly gold production for 2016 and 2017, and the total volume of shares outstanding. The forecasted gold margin (Gold price per ounce minus AISC per ounce) for the second quarter of 2017 is multiplied by 46.75% which measures the earnings yielded by the gold margin per ounce of gold produced by Newmont Mining in second-quarter 2016. I assume that this value of 46.75% is constant.
For simplicity I have omitted the production and sale of copper which accounts only for approximately 3.5% of Newmont Mining's total revenue.
A positive surprise from the earnings announcement, which is highly expected, may significantly impact on the market value of Newmont Mining that is trading at $33.88 per share. The U.S. gold stock has a market capitalization of $18.07 billion, a price-book (P/B) ratio of 1.68, a price-earnings (P/E) ratio of -28.35, a price-sales (P/S) ratio of 2.62 and an enterprise value to EBITDA ratio of 12.70.
The forward P/E ratio for Newmont Mining is 28.96.
Gurufocus gives Newmont Mining a financial strength rating of 5 out of 10 and a profitability and growth rating of 5 out of 10.
Disclosure: I have no position in any securities mentioned in this article.
