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Centamin shareholders strike gold

A bonanza final dividend from the gold miner blew away market expectations.
February 1, 2017

Yes, the table below is correct. After a very profitable year, Egypt-based gold miner Centamin (CEY) quintupled its full-year dividend for 2016, immediately turning the stock into one of the highest-yielders in the mining sector. A total return to shareholders of $178m (£141m) also smashed consensus expectations, which had taken a revised policy to pay out at least 30 per cent of net cash flow to mean, well, 30 per cent.

IC TIP: Buy at 163p

The modest 4 per cent share price rise that greeted these results suggests investors are not getting carried away with hopes for future income. That would be sensible, particularly as Centamin expects all-in sustaining cash costs to rise 14 per cent to $790 an ounce this year, along with a slight decline in production.

Nonetheless, full-year results for 2016 bear testimony to the gold miner's recent track record of treating guidance as a target to beat. The 551,036 ounces produced last year was both 26 per cent higher than 2015 and above the revised forecast range, while the precipitous drop in costs - aided by lower fuel prices - also came in below expectations.

For their part, Canaccord analysts have forecast adjusted EPS of 10¢ for 2017, assuming an average gold price of $1,183, down from 19¢ and $1,248 in 2016.

CENTAMIN (CEY)

ORD PRICE:163pMARKET VALUE:£1.88bn
TOUCH:163-163.2p12-MONTH HIGH:183pLOW: 66p
DIVIDEND YIELD:7.5%PE RATIO:9
NET ASSET VALUE:132¢NET CASH:$400m

Year to 31 DecTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
201242619918.3nil
201350418416.9nil
201447381.67.22.86
201550858.44.52.94
201668726723.015.5
% change+35+357+412+427

Ex-div: 2 Mar

Payment: 31 Mar

£1 = $1.26