Shares of silver miner 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 choppy ride for the silver stock overall, and it may not have even ended the first half of the year with gains had it not jumped a whopping 52% in just the month of May. Here’s what happened.
Silver stocks have garnered a lot of attention this year thanks to rising silver prices. A Reddit-driven silver short squeeze, first in February and another in May, added fuel to the fire. Hecla Mining is the largest silver producer in the U.S., so rising silver prices were bound to attract investor interest in the stock.
To Hecla’s credit, it also reported record sales for full-year 2020 in February and projected steady growth in silver production through 2023. Hecla’s strong operational performance continued into its first quarter during which its cash from operations jumped more than sevenfold year over year on 54% growth in sales.
Hecla Mining also boosted its dividend in anticipation of even stronger free cash flow growth through the rest of the year. Hecla’s dividend has two components: a base annual dividend of $0.015 per share, and a dividend linked to its average realized price of silver in the previous quarter, with a current threshold silver price of $25 per ounce.
In May, Hecla announced it will bump up its silver-linked dividend by $0.01 per share for each $5 increase in its average realized price above $25 per ounce. For example, shareholders can expect a total annual dividend of $0.045 per share when silver is priced at $25 per ounce and a dividend of $0.065 per share if the price of silver hits $30 an ounce.
The idea of getting higher dividends in a rising silver-price environment was appealing, and that was reflected in the stock’s price gain in May.
Hecla Mining shares have been under pressure since June perhaps due to profit booking triggered by the stock’s stellar run-up in May. The stock, in fact, is now down nearly 2% year to date as of this writing.
I expect silver stocks to be volatile, but long-term investors shouldn’t have to worry as Hecla is focused on generating greater cash flows, paring down debt, and reducing production costs as it ramps up capacity. Production at its Lucky Friday mine, for example, which is one of the only two silver mines it operates, is expected to grow more than twofold between 2020 and 2023.
In the near term, Lucky Friday’s return to full production capacity should boost Hecla Mining’s volumes, which is great news in a rising silver-price environment and something investors may want to keep an eye on when the miner reports its second-quarter numbers next month.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
Need Your Help Today. Your $1 can change life.