Goldcorp Announced Quarterly Dividend

Goldcorp will pay 2 cents per ordinary share

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Goldcorp Inc.'s (GG, Financial) board of directors declared a cash dividend for the fourth quarter of fiscal 2017 on Dec. 4.

The Canadian gold mining company will pay 2 cents per ordinary share on Dec. 22 to shareholders of record as of Dec. 14. The ex-dividend date is scheduled for Dec. 13.

The dividend is in level with Goldcorp’s previous distribution.

Goldcorp is one of the few gold producers that are publicly traded on the U.S. stock exchanges that distributes part of their levered free cash flow to shareholders.

If Goldcorp’s board of directors authorize the same quarterly distribution for the following three quarters as well, it will lead to a forward dividend of 8 cents, for a yield of 0.63%.

Even though Goldcorp has been consistently paying a dividend since 2001, it is not for its dividend that investors normally decide to buy shares of Goldcorp but to get exposure to changes in the yellow metal. This form of allocating part of a portfolio on U.S. equity is called a safe-haven investment.

For Goldcorp’s investors, however, 2017 has been a disappointing year so far because, as illustrated in the chart below, the Canadian miner lost 8%, underperforming the VanEck Vectors Gold Miners ETF – one of the most followed index by gold investors – by 14%.

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Year to date, Goldcorp has also underperformed the S&P 500 index by nearly 28%.

But there is one fact: This massive pull-back in the market value of Goldcorp sent the share price of the Canadian producer down to levels not seen on the New York Stock Exchange since late August 2004, making Goldcorp one of the best buying opportunities in the gold stock industry at the moment.

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The gold stock is trading only 70 cents above its 52-week low of $ 11.91 (the 52-week high is $17.87) and is currently trading below the 50 and 200 simple moving average lines.

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A Relative Strength Index (RSI) of 33.92 is close to oversold levels, which may indicate Goldcorp will start up-trending again any time soon.

There is another metric for useful when comparing gold mining stocks to see which one represents the best buying opportunity and to have a kind of confirmation the stock is trading cheap. This is the EVO (enterprise value per ounce of gold reserves) metric.

Goldcorp has an Enterprise Value of $13.43 billion that, dividend by a total volume of 53.5 million of proven & probable (p&p) gold reserves, as declared by the miner on June 30, 2017, leads to an EVO metric of $251.03.

If this is compared with Barrick Gold Corp’s (ABX, Financial) EVO of $258.40 ( equaling an Enterprise Value of $22.21 billion on a total volume of p&p gold reserves of 85.950 million) and with Newmont Mining Corp’s (NEM, Financial) EVO of $317.52 (equaling Enterprise Value of $21.75 billion on a total volume of p&p gold reserves of 68.5 million), shows that Goldcorp is not only undervalued by the stock market at the moment, but it is also the cheapest compared to its most direct peers.

Not to mention that Barrick Gold is the largest producer of gold in the world and Newmont is the largest producer of the yellow metal in the U.S. This is not taking anything off from Goldcorp, but in contrast, the miner can run its operations on one of the best asset bases in the industry. Goldcorp’s assets base has an average gold grade of 1.05, which is neighbouring the industry average of 1.08 and composed by producing mines and mineral interests which are localized in Canada, the fifth producer of gold in the world; in Mexico, the eighth producer of gold in the world; and in Argentina. The latter, with its annual production of 59,000 kg of the precious metal, is, according to 2014’s statistics, another leading country in global gold supply. Here, Goldcorp is driving the increase in its gold production thanks to the Cerro Negro mine.

In addition, four assets out of a total of seven (or about 47% of Goldcorp's total production of gold) are located in Canada, a friendly mining jurisdiction. Goldcorp also owns a 40% interest stake in Pueblo Viejo (Dominican Republic), which is one of the largest yellow metal deposits in world. From the Dominican asset, Goldcorp makes nearly 20% of the company's total production of gold at one of the lowest all-in sustaining costs per ounce of metal sold ($439 per ounce).

Furthermore, Goldcorp's 20/20/20 targets will also improve the relationship between the mineral reserve grade and production, extending the time in which mining activities will not affect the quality of the mineral reserves. This is very important because investors should know that the longer the gold grade stays above the industry’s average, the less the miner’s economics are stressed by the bullion, making Goldcorp a better bet for the long run.

The stock market has opened a highway to Goldcorp’s value and as of today investors cannot miss this unbelievable opportunity.

Goldcorp is trading around $12.56 per share with a price-sales (P/S) ratio of 3.04 and a price-book (P/B) ratio of 0.82. The EV/EBITDA ratio is 8.56.

Disclosure: I have no positions in Goldcorp Inc.