Why this silver stock under $ 10 rose 14.8% in the first half of 2021


What happened

Silver miner actions Hecla mining (NYSE: HL) gained 14.8% in the first six months of 2021, according to data provided by S&P Global Market Intelligence. It’s been a hectic race for the silver stock as a whole, and it might not even have finished the first half of the year with gains if it hadn’t jumped 52% over the course of the year. of the month of May alone. Here is what happened.

So what

Silver stocks have gained a lot of attention this year thanks to the rise in silver prices. A Reddit-piloted silver squeeze shorts, first in February and another in May, added fuel to the fire. Hecla Mining is the largest silver producer in the United States, so the rise in silver prices was expected to attract investor interest in the stock.

To Hecla’s credit, it also achieved record sales for the full year of 2020 in February and forecast steady growth in silver production through 2023% sales growth.

Image source: Getty Images.

Hecla Mining also increased its dividend in anticipation of even stronger growth in free cash flow over the rest of the year. Hecla’s dividend consists of two components: a basic annual dividend of $ 0.015 per share and a dividend tied to its average realized silver price in the previous quarter, with a current threshold silver price of $ 25 per share. ounce.

In May, Hecla announced that it would increase its silver-related dividend by $ 0.01 per share for every $ 5 increase in its average realized price above $ 25 an ounce. For example, shareholders can expect a total annual dividend of $ 0.045 per share when the price of silver is $ 25 per ounce and a dividend of $ 0.065 per share if the price of silver reaches. $ 30 per ounce.

The idea of ​​getting higher dividends in a rising silver price environment was appealing, and this was reflected in the stock price gain in May.

Now what

Hecla Mining shares have been under pressure since June, possibly due to profit taking triggered by the stock’s surge in May. The stock, in fact, is now down almost 2% year-to-date at the time of writing.

I would expect silver stocks to be volatile, but long-term investors shouldn’t have to worry as Hecla is focused on generating greater cash flow, reducing debt, and saving money. reduction in production costs as it increases its capacity. Production from its Lucky Friday mine, for example, which is one of only two silver mines it operates, is expected to more than double between 2020 and 2023.

In the near term, Lucky Friday’s return to full production capacity is expected to boost Hecla Mining’s volumes, which is great news in a rising silver price environment and something investors may want. watch when the miner releases their second quarter numbers next month. .

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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