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.
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Fool contributor Victoria Hetherington has no position in any of the stocks mentioned.