The bearishness surrounding resource companies is creating an unappreciated benefit for investors: rising dividend yields. Even as the highly followed index, the S&P 500, continued its steady rise and recovered from the sell-off that began in the middle of April, key companies in the resource sector have yet to outperform the index.
TransCanada Corporation (USA) (NYSE:TRP), Barrick Gold Corporation (USA) (NYSE:ABX), and Potash Corp./Saskatchewan (USA) (NYSE:POT) reported earnings recently. Barrick Gold Corporation (USA) (NYSE:ABX) is by far the worst performer in 2013, as the recent decline in gold companies led the resource sector lower.
Providing a yield of between 2.9% and 4.2%, these three companies are compelling income investments, but this idea requires that two things be met. First, the share price must not decline. Second, the balance sheet needs to be healthy enough to support the dividend. Will these companies meet these requirements?
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Data Source: Yahoo! Finance
How the mighty fall
Barrick Gold Corporation (USA) (NYSE:ABX) is the most compelling investing idea for value investors. Shares are down 55% from the 52-week high of $42.67. Since reaching a bottom recently, shares are clawing back, closing recently at $19.26. The Pascua-Lama project is the primary concern for investors. Costing $4.8 billion so far, the project needs to get back on track. A court forced Barrick Gold Corporation (USA) (NYSE:ABX) to suspend construction earlier last month.
Barrick Gold Corporation (USA) (NYSE:ABX) reported quarterly results that beat expectations by $0.03 per share. The company earned $0.92 per share on sales of $3.44 billion. During its conference call, the company acknowledged that it would even consider reducing project spending for Pascua-Lama, and that suspending construction was not out of the question.
Strong cash flow and access to the debt markets ensure that Barrick Gold Corporation (USA) (NYSE:ABX) will still pay dividends. CapEx was lowered by $500 million to between $5.2 billion and $5.7 billion. The company generated $1.1 billion in cash flow during the first quarter, producing 1.8 million ounces of gold. For 2013, the company forecasts production of 7-7.4 million ounces of gold.