Gold mining stocks day four: Kinross Gold Corp (KGC)

Price: $13.26

Shares: 1.14 billion

Market capitalization: $15.08 billion

Bonds outstanding: $3.3 billion

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None of Kinross’ bonds are due anytime soon.

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DIVIDEND RECORD – Kinross has been paying a low semi-annual dividend since 2008.  There isn’t much history there, but they have grown the dividend by 50% from $0.04 to $0.06 in 4 years.

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Dividend: $0.06 semi-annually

Dividend yield: 0.9% ($0.12 annual DIV/$13.26 share price)

Dividend payout ratio: 15% to 38% depending on how you calculate ($0.12/$0.81 recent EPS or $0.12/$0.26 avg adjusted EPS over six years)

EARNING POWER – Six year average adjusted earnings of $0.26 per share @ 1.142 billion shares

(Earnings adjusted for changes in capitalization – Kinross has increase the number of shares by 223% since 2006)

                        EPS       Net Inc.             Shares               Adj EPS

2006                 $0.47    $165 M              353 M                $0.14

2007                 $0.59    $334 M              566 M                $0.29

2008                 ($1.28) ($807 M)           629 M                ($0.71)

2009                 $0.44    $310 M              697 M                $0.27

2010                 $0.93    $772 M              829 M                $0.68

—————————————————————————-

2011 Q1            $0.22    $256 M              1,139 M             $0.22

2011 Q2            $0.22    $247 M              1,141 M             $0.22

2011 Q3            $0.19    $213 M              1,142 M             $0.19

2011 Q4            $0.24 E $274 M E           1,142 M             $0.24 E

20011 E             $0.87    $990 M E           1,142 M             $0.87 E

Six year average adjusted earnings of $0.26 per share.

Consider contrarian buying at $2.08 (8 times average adj EPS)

Consider value buying at $3.12 (12 times average adj EPS)

Consider speculative selling at $5.20 (20 times average adj EPS)

Kinross Gold Corp is currently trading at 51 times average adjusted annual earnings.  The is highly speculative pricing.

BALANCE SHEET – That is a nice balance sheet, but goodwill accounts for 33% of assets.  It would still be a good balance sheet if goodwill were zero.

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Book value per share: $13.22

Price to book value ratio: 1.00 (good)

Current ratio: 4.43 latest quarter (over 2.0 is good)

Quick ratio: 3.19 latest quarter (over 1.0 is good)

Debt to equity ratio: 0.09 (this is good)

CONCLUSION – Kinross Gold Corp. is a low dividend grower that is speculatively priced for its earning power.  The company’s balance sheet is strong.

Kinross bottomed in the $8.81 dollar range in October 2008 several months before the US stock market bottom in March of 2009.  That represented the best investment entry into Kinross since late 2008.  The gold price will go down at least half of the percentage of the stock market’s decline.  This happened in 2008-2009.  US stocks dropped about 50% and gold dropped about 25%.  However, Kinross dropped even more than the broader market or gold.  It dropped almost 67% from $26.84 in March 2008 down to $8.81 by October 2008.  Don’t think that it won’t happen again.  Wait for another bottom near value territory at $5.20 per share.  Kinross would be yielding about 2.3% if it keeps its new dividend rate at such a low price.  The good news is that gold will continue to go up in price as the world’s sovereign debt crisis worsens, but you have to buy extremely low to preserve your capital when purchasing mining stocks.

DISCLOSURE – I don’t own Kinross Gold Corp. (KGC).

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Published in: on December 8, 2011 at 5:31 pm  Leave a Comment  

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