This stock has been battered from pillar to post, and is down more than 68% in the last 12 months, but could be the dividend surprise of the year. By comparison, the S&P/ASX 200 index (index:^AXJO) (ASX:XJO) is up 18%.
The company has paid a dividend since 2002, apart from 2007 and 2008, despite being a gold miner. Yes, you heard correctly, it's a gold miner. It paid a 20 cent dividend last financial year, and is currently trading at around $1.85, putting it on a trailing dividend yield of 10.8%. According to consensus forecasts, in 2013 the company is expected to pay a total dividend of 15 cents, which equates to around an 8% dividend yield. It's not franked, as most of the miner's earnings comes from offshore.
Not bad for a down year for the company. But 2014 and onwards looks exceptionally bright. Analysts expect the company to earn 70 cents in 2014, and pay a dividend of around 35 cents. That represents a P/E ratio of just 2.6 and a dividend yield of 19%, based on the current price. It appears achievable – assuming gold prices stay around current levels, and barring any unforeseen events.
2013 – A transition year
2013 could be viewed as a down year for the company, with profits falling in the first half by 76% due mainly to non-cash writedowns. The company, which has its flagship mine in Thailand, and another in Australia, experienced delays in receiving a licence for one of its processing plants. It's flag ship mine also underwent an accelerated development program to set it up for a sustainable future.
Now it has the mine setup and has received its metallurgical licence, the second half of 2013 looks much better than the first half. In the first six months, the company produced 90,400 ounces of gold, but expects to produce between 212,000 and 225,000 ounces of gold for the full year. That suggests the second half will produce at least 120,000 ounces of gold.
Most of that production will come from the offshore flagship mine, which has very low production costs, compared to other global and Australian gold mines. Recently, the company reported that production at its Thailand mine would come in between 132,000 and 135,000 ounces, at a total cash cost of between US$700 to US$800 an ounce, including silver credits and royalties. Royalties currently represent US$150 an ounce, but decrease as the gold price falls.
So you want to know the name of this company?
It's Kingsgate Consolidated (ASX:KCN). For those investors willing to take on a high risk play, with potentially high returns of both capital gains and dividends, Kingsgate could be for you.
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Motley Fool writer/analyst Mike King owns shares in Kingsgate Consolidated.
