Wheaton Precious Metals Captures Rising Metal Prices as Cash Flow Booms

The precious metals market has seen significant price fluctuations in recent years, but Wheaton Precious Metals (NYSE: WPM) is one company that's turning higher metal prices into increased dividend payments for its shareholders. The company's streaming business model allows it to purchase a fixed percentage of future silver and gold production at low contractual cash costs.

This structure shields Wheaton from inflation, which has historically eroded mining operating margins. During the second quarter, Wheaton paid an average of $9.57 per ounce of silver and $543 per ounce of gold under its long-term agreements. It then sold that metal for significantly higher prices: $73.41 per ounce of silver and $4,452 per ounce of gold.

Wheaton's cash operating margins for silver jumped 139% to $66.96 per ounce in the first half of this year, while its cash operating margin for gold increased 56% to $4,099 per ounce. This means nearly every extra dollar from rising metal prices flows directly into cash flow.

Wheaton raised its quarterly dividend by 18% earlier this year and still has room to grow further. With a payout ratio of just 16% of net earnings per share, the company is well-positioned to reward shareholders with continued dividend increases in the future.