Resource World Magazine

age of a company's profit is being paid out in dividends. A stock with a high dividend payout ratio is not necessarily a good investment. A company needs to retain enough of its income to invest in growth and maintain operations. How do you calculate a stock's dividend payout ratio? The Dividend Payout Ratio (DPR) = Dividends Per Share (DPS)/Earnings Per Share (EPS). Consider the example below. • ABC Resources Inc. has 10,000,000 shares outstanding. • ABC Reported fourth quarter earnings of $20 million (= $2.00 EPS). • ABC paid half of their earnings to their shareholders as dividends (= $1.00 DPS). (100/200 = 0.50) ABC Resources has a Dividend Payout Ratio of 50% (DPR). An investor should also consider a company's debt to equity ratio. A company that has $20 million in debt and $40 mil- lion in equity has a debt-to-equity ratio of 0.5 ($10M/$20M). Depending on the sector, debt ratios will vary. The resource industry is a sector with high capital costs and a company can spend a great deal of money on project expansions and acquisitions. However, an established producer will have a more consistent debt-to-equity ratio over time. A debt-to-equity ratio of 2 is normal for capital-intensive industries like car makers, while some companies, like technology companies, can have a ratio as low as 0.5. Another thing for an investor to consider is the company's dividend payout history. A company that pays out dividends consistently over time is a company that is financially stable; it is likely to continue to attract investors and gain shareholder loyalty. A company will often find ways to reduce costs before risking the chance of shareholders selling on news of a dividend cut. Some resource companies have considerable histories of dividend payouts. April 30, 2013, Agnico Eagle Mines Ltd. [AEM-TSX, NYSE] announced "a 10% increase in the quarterly cash dividend to $0.22 per common share. The next quarterly dividend will be paid on June 17, 2013 to shareholders of record as of June 3, 2013. Agnico Eagle has now declared a cash dividend to its shareholders for 31 consecutive years." Gold Resource Corp. [GORO-NYSE MKT] shareholders have the option to receive gold and silver dividends which provides direct exposure to physical precious metals. Shareholders can take delivery of their physical precious metals, directly into a Gold Bullion International approved vault or into a vault of their choosing. There are also tax advantages. Depending where you live, dividend income is taxed significantly lower than other types of investment income. Left is a selection of companies that pay out dividends. n Gold Resource Corporation NYSE MKT: GORO Monthly Dividends: Gold, Silver or Cash WWW.GOLDRESOURCECORP.COM SEPTEMBER 2013 www.resourceworld.com 21

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