A 150% Increase in This Silver Company's Dividend
On May 14, 2012, Brian Hicks recommended silver and gold producer Pan American Silver (NASDAQ: PAAS). Almost a year later, his thesis on Pan American Silver hasn't changed. Here's why...

This Article Originally was Published here: http://www.wealthdaily.com/articles/a-150-increase-in-this-silver-companys-dividend/4013

On May 14, 2012, I recommended Wealth Daily readers buy shares of silver and gold producer Pan American Silver (NASDAQ: PAAS).

My thesis at the time was silver was about to break out to the upside — and the fundamentals of PAAS were very compelling.

Back then, Pan American Silver was trading for roughly $16 a share. It was trading for a P/E of 4, with over $450 million in cash sitting in the bank.

In early November 2012, shares of Pan American Silver reached nearly $23 a share — for a 43% gain in just seven months...

225_brian_chart1

Almost a year later, my thesis on Pan American Silver hasn't changed, even though shares are back to our original entry price from May 2012.

But the good news is PAAS has announced a 150% increase in its dividend payout.

I'll talk more about that in a second, but first I want to talk about silver and gold...

Because both are back to their May 2012 prices of around $28 and $1,550 an ounce, respectively.

225_brian_chart2It's as if we went back in time...

And to be blunt, I see the exact same technical and fundamental setup as I saw this time last year.

The Talking Heads Turn on Gold and Silver — Again

If you've been watching CNBC or Bloomberg throughout the month, you've noticed a chorus of talking heads proclaiming the 12-year-old precious metals bull market is over.

The reasons they're giving for not owning gold or silver now is the same worn-out song and dance we've heard throughout the entire life of this precious metals bull market...

  • Global demand for gold dropped 4% in 2012.
  • There is no inflation; if all the money printing hasn't produced inflation by now, it never will...
  • The U.S. economy is recovering, reducing the demand for more monetary stimulus.
  • Investors are rotating out of precious metals and into stocks.
  • Savvy investors like George Soros are selling their gold and silver holdings.

You can find similar media headlines and "reasons" for selling gold and silver in each of the last 12 years, especially since 2008.

A great example of this is when Greg McCoach appeared on CNBC in January 2007. At the time, gold was trading for around $650 an ounce and silver for $12.50 an ounce. You can watch his video here.

You may recall that during 2006, the world's central banks were selling physical gold into the market...

Today they are net buyers, purchasing gold bullion not seen in 50 years. Russia and Putin are the best example of this.

According to reports:

The World Gold Council said that in value terms, gold demand in 2012 was over $235 billion — an all-time high — and fourth-quarter figures of more than $66 billion marked the highest Q4 total ever.

Central bank buying, especially in the developing world, was responsible for about 12 percent of the total demand for gold in 2012, up from 10 percent the previous year.

According to the council's research, even as the price of the precious metal averaged a record $1,669 for the year, central bankers bought more than 534 metric tons — the highest level since 1964 and 17 percent more than in 2011.

In addition to a 50-year high in buying by central banks, there are other reasons to be bullish on gold and silver:

  • Global supplies of gold supplies declined 1.4% last year and are forecast to decline again this year.
  • Europe is headed for another recession.
  • Because of weak global economies, debt is growing at an alarming rate ($16.5 trillion in the United States).
  • As the U.S. economy recovers, industrial demand for silver will increase.

And this is why I'm reissuing a buy on silver in general — and Pan American Silver, in particular.

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Last week Pan American Silver reported its FY2012 numbers, hitting all-time records on many metrics... most notably, record revenue on record silver and gold production and record reserves.

PAAS produced 6.9 million ounces of silver last year, an increase of 29%; its gold production of 32,400 ounces was an increase of 88%.

Its silver reserves shot up, too. Take a look:

Proven & probable silver mineral reserves as of December 31, 2011(1)

235.3 million ounces

Less: Contained ounces mined during 2012

(26.0) million ounces

Plus: Contained ounces discovered by exploration during 2012

31.2 million ounces

Subtotal

240.5 million ounces

Plus: Contained ounces acquired (Dolores and La Bolsa)

80.6 million ounces

Less: Contained ounces sold with Quiruvilca

(4.2) million ounces

Proven & probable silver mineral reserves as of December 31, 2012(1)

316.9 million ounces

 

Just like last year, I currently find PAAS' fundamentals very compelling...

Pan American Silver trades at a market cap of $2.5 billion on trailing twelve-month revenue of $929 million. Its cash position is $548 million. Its P/E multiple is 10 on earnings per share of $1.63.

Plus the company has been growing its revenue at a robust clip. Take a look:

Year                     Revenue
2005                     $122M
2006                     $255M
2007                     $301M
2008                     $339M
2009                     $455M
2010                     $632M
2011                     $855M 
2012                     $929M

In my monthly Wealth Advisory newsletter, I'm always looking for companies that are cash-rich and raising their dividends.

In its FY2012 report, PAAS announced it'll be increasing its quarterly dividend by 150%.

According to CEO Geoff Burns: "This is the fourth and most significant dividend increase we have delivered since announcing our first cash dividend in February 2010."

The company will pay $0.125 per share starting in March. That's a 150% increase from its previous dividend of $0.05.

At these valuations, I believe PAAS is a screaming buy.

And not only will you be rewarded with a steady dividend stream, but I believe you'll see substantial capital appreciation — just like we did last year.

Forever wealth,

Brian Hicks Signature

Brian Hicks

Brian is a founding member and President of Angel Publishing and investment director for the income and dividend newsletter The Wealth Advisory. He writes about general investment strategies for Wealth Daily, Energy & Capital and the H & L Market Report. Known as the "original bull on America," Brian is also the author of the 2008 book, Profit from the Peak: The End of Oil and the Greatest Investment Event of the Century. In addition to writing about the economy, investments and politics, Brian is also a frequent guest on CNBC, Bloomberg, Fox and countless radio shows. For more on Brian, take a look at his editor's page.

This Article Originally was Published here: http://www.wealthdaily.com/articles/a-150-increase-in-this-silver-companys-dividend/4013



A 150% Increase in This Silver Company's Dividend originally appeared in Wealth Daily. Wealth Daily, a free daily newsletter, offers practical investment analysis and contrarian stock market advice.
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