The surplus cash will go to shareholders
This interview with DRD gold’s CEO Niel Pretorius may be of interest to subscribers.
Gold miners are increasingly focusing on free cash flow. As the gold price recovers and they demur from massive expenditures on expansion. the potential for dividends to increase is a major positive development for investors and is contributing to the positive performance of related shares. This is particularly noteworthy when interest rates are so low and investors are hungry for yield.
South African gold miners were notable for paying outsized dividends in the 1970s and they are again leading the way in terms of payouts in this particular portion of the cycle. DRD Gold has a 12-month yield of 2.88% and the share has rocketed higher this year to test the 2013 highs. Some consolidation is underway, not least as the Rand strengthens, but a sustained move below ZAR1000 would be required to question medium-term upside potential.
Sibanye Gold with a dividend yield of 2.38% is now also a platinum miner. It has sustained its record of paying out profits in the form of dividends to shareholders since its IPO and continues to trend higher. However it is increasingly susceptible to some consolidation of recent powerful gains.
