Updated on November 2nd, 2021 by Bob Ciura
Silver stocks operate in a highly cyclical industry. Profits for mining companies are reliant on high precious metals prices. During times of rising precious metals prices, this results in a massive windfall.
But the opposite is also true–lower precious metals prices can cause mining companies to post losses. As a result, income investors looking for stable cash flow and reliable dividends need to tread carefully.
With this in mind, we created a list of silver stocks with important financial ratios such as price-to-earnings ratios and dividend payout ratios.
You can download our full list of silver stocks by clicking on the link below:
In addition to the Excel spreadsheet above, this article covers our top 5 silver stocks today. The companies analyzed primarily focus on silver, but are also engaged in mining of other metals such as gold or zinc.
We rank these 5 companies by a qualitative combination of asset quality, balance sheet strength, future growth prospects, and dividend safety.
Table of Contents
- Silver Stock #5: Wheaton Precious Metals (WPM)
- Silver Stock #4: Pan American Silver Corporation (PAAS)
- Silver Stock #3: Hecla Mining Company (HL)
- Silver Stock #2: Fresnillo Plc (FNLPF)
- Silver Stock #1: Glencore plc (GLCNF)
Silver Stock #5: Wheaton Precious Metals (WPM)
Formerly known as Wheaton Silver, Wheaton Precious Metals was started in 1994. The company has a market capitalization of $18 billion.
Wheaton is the largest metal streaming company in the world. Streaming means that the company purchases the right to buy silver and gold at a low fixed cost instead of outright mine ownership. It has 24 operating mines and another 8 development projects around the world.
Source: Investor Presentation
Wheaton’s earnings-per-share performance has been quite volatile over the last decade. Due to its business model, Wheaton doesn’t control how much gold or silver is mined from a specific location nor does the company have control over the market prices for the precious metals.
Click here to download our most recent Sure Analysis report on WPM (preview of page 1 of 3 shown below):
Silver Stock #4: Pan American Silver Corporation (PAAS)
Pan American Silver Corporation explores, acquires, develops and refines silver produced from its mines. The company has a market cap of $5 billion.
The company has operations in both North and South America.
Source: Investor Presentation
Pan American operates silver mines in the U.S., Canada, Peru, Mexico and Argentina. The company has used acquisitions to help fuel future growth, for example acquiring Canadian precious metal mining company Tahoe Resources in 2019.
The company generates approximately 58% of its revenue from gold, 27% from silver, and the remaining ~15% from copper, zinc, and lead.
Pan American is a strong cash flow generator, with $1.6 billion in free cash flow generated since 2010. With its free cash flow, the company invests in growth, pays its debt, and returns cash to shareholders.
Pan American has paid a dividend every year since 2008, though the company cut its dividend in both 2015 and 2016.
Over the last two years, however, Pan American’s dividend has grown at a high rate. Pan American increased its dividend by 40% in 2020, and by another 43% in 2021. The stock yields 1.6% today.
Silver Stock #3: Hecla Mining Company (HL)
Hecla Mining Company has been in business since 1891. The company, along with its subsidiaries, develops, produces, markets and explores for both precious and base metals around the world.
The company sells unrefined gold and silver to traders in the precious metal markets. Hecla also provides lead, zinc and bulk concentrates to smelters.
Hecla has interests in Alaska, Colorado, Idaho, Montana, Canada, and Mexico. According to Hecla, it produces over 40% of U.S. silver.
Source: Investor Presentation
Hecla’s business performance is at the mercy of the markets for its precious and base metals. The company does have some advantages. First, Hecla is the largest silver producer in the U.S. and the third largest producer of lead and zinc.
The company also focuses on mines with a long reserve life. Its core properties have an estimated reserve life of between 11 and 15 years.
Hecla pays a quarterly dividend of $0.01125, after raising the dividend three times in the past year. The current yield is 0.8%.
Hecla maintains a bullish long-term view of silver, due largely to favorable supply-and-demand economic factors.
The company believes that by 2030, silver demand will reach 1,147 million ounces if demand stays on the current trend. This compares to 2019 supply of 1,023 million ounces and demand of 1,074 million ounces.
Therefore, the supply-demand imbalance will require additional supply in order to meet projected demand. This could lead to promising long-term growth for Hecla.
Fresnillo is the world’s leading producer of silver and the largest producer of gold in Mexico. The company’s shares are listed on the London stock exchange. Besides silver and gold, Fresnillo explores for lead and zinc concentrates.
The company also leases mining equipment, supplies semi-pure alloys of gold and silver and provides administrative services. Fresnillo has a market capitalization of $9 billion.
Fresnillo is a diversified company.
Fresnillo produced 53.1 million ounces of silver last year, and it has silver resources of 2.3 billion ounces. The company has total assets of $5.9 billion.
Like many companies on this list, Fresnillo has experienced wide variance in earnings results. The company has produced a loss several times over the last decade.
However, last year the company grew revenue by 14.6% to $2.4 billion for 2020. EBITDA margin expanded from 32% to 48% in 2020, compared with 2019. EBITDA reached $1.17 billion for 2020.
Fresnillo’s policy is to pay out 33% to 50% of profit after tax in the form of dividends. The company pays out one-third of the dividend in September while the remaining two-thirds of the dividend is paid in June.
Because profit changes from year-to-year and currency exchange impacts what amount U.S. investors are paid, the dividend has varied over the years. Investors should note that the company has paid a dividend for at least 10 consecutive years, the longest streak of any company on this list.
Based on the trailing two semi-annual payments, the stock yields 2.8%, which is relatively high among silver stocks. This makes Fresnillo an appealing pick within the silver stocks, especially for investors looking for higher income.
Silver Stock #1: Glencore plc (GLCNF)
Glencore was founded in 1974 and is one of the leading companies in the mining sector. Glencore plc was the result of merging Glencore with Xstrata on 5/2/2013.
The company smelts, refines, mines, processes and stores silver, copper, zinc, aluminum, nickel, cobalt, iron ore and other metals.
Glencore, which is the largest company in Switzerland, also has an energy and agricultural products segment. This makes the company the most diversified on this list. Diversification is especially valuable when considering silver stocks, considering the volatility of precious metals prices.
With a market cap of $65 billion, Glencore is also the world’s biggest commodities trading company.
While silver is the company’s largest metal produced, Glencore is also a leader in several other areas.
Glencore takes the top spot among silver stocks because of its industry-leading scale, and its impressive financial results. In the first half of 2021, total adjusted EBITDA increased 79% compared with the same six-month period in 2020.
The company’s industrial segment, which includes its mining operations, led the way over the first half with 152% segment adjusted EBITDA growth.
You can see an overview of the financial performance of the industrial segment in the image below:
Source: Investor Presentation
As you can see, Glencore is a global leader in the production of copper, cobalt, zinc, nickel and seaborne energy coal.
Glencore is the largest name in its sector, which should fuel continued growth in the years ahead. We also find the diversified business model away from precious metals to be attractive as well.
The company also has a strong balance sheet. It has meaningfully reduced debt in the past year. For example, Glencore ended the 2021 first half with $10.6 billion in net debt, down from $15.8 billion at the same point in 2020. In turn, its net-debt-to-adjusted-EBITDA ratio fell to 0.69x to end the 2021 first half, down from 1.37x year-over-year.
Glencore also has a credit rating of BBB, which is investment-grade. Lastly, Glencore pays two dividends per year. In April, the company announced a dividend payout of $0.12 per share, then in August another payment of $0.04 per share was announced.
In total, an annual dividend payout of $0.16 per share represents a current yield of 3.3%. Due to the combination of a 3%+ dividend yield, strong balance sheet, and durable competitive advantages, Glencore is our top pick of the silver stocks.
Investing in silver stocks is best left to those with higher risk tolerances. The companies on this list have each struggled during various portions of the past decade. Some companies have rarely recorded a profit for the year.
Moreover, many silver stocks do not pay dividends, and even those that do cannot be counted on to maintain their dividends during a recession, or during periods of declining silver prices.
That said, if investors are interested in silver stocks, we believe that Fresnillo and Glencore are the best options.
You can see more high-quality dividend stocks in the following Sure Dividend databases, each based on long streaks of steadily rising dividend payments: