Nevsun Resources (NSU.TO; NYSEMKT:NSU) has announced they’ll increase their dividend by 40% to $0.14 per annum. Based on the current share price of $3.30, Nevsun currently has a gross yield of approximately 4.25%.
The company is currently making the transition from a gold producer to a copper producer, and should start the copper exports later this year.
Nevsun had a working capital of in excess of $400M at the end of Q1, and we are expecting the company to make an acquisition later this year to expand their production profile. As there are currently a lot of cheap acquisition targets on the market, we expect Nevsun to diversify out of Eritrea to reduce the perceived risk profile of the company.
If the company doesn’t put its money to work through an acquisition, we’d urge them to initiate another (larger) share buyback program now the share price is relatively low, and to increase the dividend even further.
For some investors, it might be attractive to write some put options as well.
> Click here to read the press release
Disclosure: The author holds a long position in Nevsun Resources and has written puts. Please see our disclaimer for current positions.
