Investing in mining stocks grants you the stability, value and long-term demand behind commodities at the foundation of our everyday lives, including the cars we drive, the computers we work on and the houses we live in.
While solid prospects for long-term value creation are nothing to scoff at, junior miners, which offer the highest returns, tend to require over a decade of patience for investors to benefit from resource extraction.
For those interested in getting paid to wait while maintaining exploration upside, mining dividend stocks in Canada, a top mining nation, may be a more appropriate option for your portfolio.
How I picked the top 5 mining dividend stocks in Canada
I began my search for the top 5 mining dividend stocks in Canada by using The Globe and Mail’s stock screener to isolate dividend-paying companies with positive price-to-earnings ratios (P/E).
Next, I went through the entries, ordered from lowest to highest P/E ratio to favour undervaluation, scanning for stocks with profitable net income in each of the past four years (discounting the Pandemic year of 2020). Here are the highest-ranking stocks for the first five commodities represented on the screen:
- Labrador Iron Ore Royalty, 9.63 P/E (trailing twelve months), 10.25 per cent dividend.
- Amerigo Resources, 9.05 P/E ttm, 7.50 per cent dividend.
- Goodfellow, 8.44 P/E ttm, 3.85 per cent dividend.
- Perseus Mining, 7 P/E ttm, 1.93 per cent dividend.
- Parex Resources, 4.16 P/E ttm, 10.3 per cent dividend.
The top 5 mining dividend stocks in Canada
5. Labrador Iron Ore Royalty: Steel
Our first pick for top mining dividend stock in Canada is Labrador Iron Ore Royalty, which holds a 15.10 per cent equity interest in Iron Ore Company of Canada (IOC) directly and through its wholly-owned subsidiary, Hollinger-Hanna.
The IOC is a top North American producer and exporter of iron ore pellets and high-grade concentrate and top-five global producer of seaborne iron ore pellets. Production, initiated in 1962 in Labrador City, Newfoundland and Labrador, in overseen by mining giant Rio Tinto, the project’s majority shareholder at 58.7 per cent, followed by Mitsubishi at 26.2 per cent.
Mineral reserves and resources stand at 1.1 billion tons and 1.7 billion tons, respectively, with almost 17 million tons produced in 2023, making IOC a reliable vehicle to capitalize on steel’s long-term tailwind.
Labrador Iron Ore receives a 7 per cent gross overriding royalty on all iron ore products produced, sold and shipped by IOC, as well as a 10 cent per ton commission on all iron ore products produced and sold by IOC.
Thanks to consistent high-margin production over the past five years, shareholders have benefitted from strong annual net income averaging over C$200 million, allowing the company to pay a substantial dividend – at a relatively high 89 per cent payout ratio – whose volatility is more a matter of active management based on market conditions than a cause for concern.
Labrador Iron Ore Royalty stock (TSX:LIF) last traded at C$29.72 and has added 28.71 per cent since 2020.
4. Amerigo Resources: Copper
Our next mining dividend stock worth a deep dive is Amerigo Resources, a copper recovery operation using waste material from Corporación Nacional del Cobre de Chile’s (Codelco) El Teniente mine, the world’s largest underground copper mine, whose productive life will extend to 2082.
Amerigo has recovered almost 1 billion pounds of copper from El Teniente since 1992, replacing the equivalent of one 30,000 ton-per-year copper mine.
Management has delivered on its mission of shareholder value creation since 2021, paying a C$0.02 to C$0.04 cent annual dividend – at a reasonable payout ratio of 73 per cent – backed up by robust operating cash flow and positive net income since 2020, as well as pure-play exposure to copper demand‘s expected long-term growth.
Amerigo Resources stock (TSX:ARG) last traded at C$1.60 and has added 201.89 per cent since 2020.
3. Goodfellow: Lumber
In the middle of the pack is Goodfellow, a diversified lumber products manufacturer and wholesale distributor of building materials and floor coverings. Though it’s a resource play, and not strictly a mining stock, Goodfellow’s coast-to-coast Canadian distribution footprint and presence in strategic international markets is a barrier to entry that merits inclusion on our list.
Investors are currently receiving a dividend of C$0.50 per year – having fluctuated as low as C$0.20 and as high as C$1 per year since 2015 – with a low 49 per cent payout ratio comfortably covered by earnings.
Net income is on track to be positive for a sixth-straight year in 2024, with over C$10 million generated through three quarters and an annual average of over C$20 million since 2019. Operations are squarely aligned with creating shareholder value from lumber’s multi-decade tailwind through 2050.
Goodfellow stock (TSX:GDL) last traded at C$12.25 per share and has added 140.20 per cent since 2020.
2. Perseus Mining: Gold
Our Canadian mining dividend stock in the gold category is Perseus Mining, an Australia-based operator of three gold mines in Africa – Edikan in Ghana and Sissingué and Yaouré in Côte d’Ivoire – accounting for a combined 4.9 million ounces of measured and indicated resources and 2.9 million ounces of proven and probable reserves. Perseus also owns the Nyanzaga gold project in Tanzania and the Meyas Sand gold project in Sudan, both of which are on paths to production.
Stable all-in sustaining costs and a rising gold price (slide 5) have allowed Perseus to grow production to over 100,000 ounces per year since Q4 fiscal 2021, while growing net income every year from US$63.04 million in fiscal 2020 to US$324.28 million in fiscal 2024, suggesting management deserves your conviction when it comes to transforming its ounces into shareholder value.
Dividends have grown from AU$0.015 in 2021 to AU$0.05 in 2024, too short for forecasts, but at a minimal payout ratio of only 14 per cent, there is clearly room to run, especially with gold keeping close to all-time-highs of more than US$2,600 per ounce.
Perseus Mining stock (TSX:PRU) last traded at C$2.33 per share and has added 142.71 per cent since 2020.
1. Parex Resources: Oil
Our cheapest mining dividend stock on a P/E basis is Parex Resources, one of the largest independent oil and gas companies in Colombia with a prospective land position exceeding 5.4 million acres.
Thanks to oil production growth from its Cabrestero property and steady output from the LLA-34 block, the company averaged over US$300 million in annual net income from 2019 to 2023. This robust cash flow allowed it to institute a C$0.50 annual dividend in 2021, which has grown considerably to C$1.54 per year as of December 2024, despite only representing a payout ratio of 45 per cent. The company has also consistently bought back its stock, reducing its total shares outstanding from 162 million in 2018 to 98.7 million in November 2024.
Lower than expected results in 2024, as detailed in Q3 2024, have sent Parex Resources stock (TSX:PXT) tumbling by 36 per cent year-over-year, with the broader market confusing normal operational headaches like unexpected downtime and minor equipment issues with a reason to sell this money-making machine brimming with exploration opportunities.
Join the discussion: Find out what everybody’s saying about these mining dividend stocks on the Parex Resources Inc., Perseus Mining Ltd., Goodfellow Inc., Amerigo Resources Ltd. and Labrador Iron Ore Royalty Corp. Bullboards and check out the rest of Stockhouse’s stock forums and message boards.
All data as of Jan. 6-7, 2025.
The material provided in this article is for information only and should not be treated as investment advice. For full disclaimer information, please click here.
(Top photo of Perseus Mining’s Sissingué gold mine in Côte d’Ivoire: Perseus Mining)