The outlook for silver is looking increasingly bright. This should be heartening for precious metals investors eyeing a retreat in gold. While a silver bull market is not quite raging, it’s still in its preliminary stage. High-grade resources remain a limiting factor as demand grows, adding up to potentially higher prices. All of this makes now a good time to start scouting for shares in the best-positioned miners of the white metal.
Shining track records make for solid stocks
Kicking off the list, Fortuna Silver Mines has seen its earnings step up 200% in the last year. A healthy stock selling at fairly decent per-sector value, Fortuna shareholders can look to a strong track record for reassurance. A price to book of just under twice book undercuts the sector average of three times. A conservative estimate could see total returns of up to around 180% in the next five years.
A solid streaming option, Wheaton Precious Metals is stabilized by a diverse range of low-cost contracts focused on longevity. Of special interest to silver investors will be Wheaton’s stream on Newmont’s Peñasquito mine. A forward-looking mandate encompasses value purchases, growth potential, and payment of a dividend. This latter facet is characterized by a 1% to 1.2% yield with reassuringly low 41% payout ratio.
Moving briskly along, Endeavour Silver saw 100% earnings growth in last 12 months and could have more ahead. Five-year returns are expected to hit 200%. In the shorter term, 100% total shareholder returns could be forthcoming within 12 months. Value for money may not be the main draw here — P/E, PEG, and P/B ratios all exceed peer norms. That said, Endeavour’s outlook is impressive, with an annual continuation of that 100% earnings growth predicted.
Mining quality stocks for upside
Investors on the lookout for share price gains have another strong option in Silvercorp Metals (TSX:SVM)(NYSE:SVM). Fairly good per-peer value is demonstrated by a P/B of 2.5 times book, undercutting the sector average of 2.9. A debt-free balance sheet somewhat ameliorates a somewhat dull outlook. However, this stock shakes out as a moderate buy for the general capital gains investor, with price targets suggesting up to 65%.
While passive income isn’t always the defining factor for any commodities investment, it might also be worth noting that Silvercorp pays a small dividend yield of 0.4%. The reason why this is worth paying attention to is that the payout ratio is very low at just 11%. The company therefore has plenty of wiggle room if it decides to pad out that distribution. In the meantime, a silver bull market could see this name grow into a potential role as a momentum stock.
In summary, silver performed well in 2020, and expectations are high for the year ahead. From trough to peak, silver gained almost 140% last year. That’s actually considerably stronger resilience than gold — much trumpeted last year — which gained around 40% by the same measurements. If a silver bull market switches up a gear from meandering to raging, shareholders could reasonably expect to clean up over the next 12 months.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. 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, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Victoria Hetherington has no position in any of the stocks mentioned.