Silver Wheaton dividend triples as company links payout to cash flow

There is no doubt about it: precious metal companies are getting serious about paying higher dividends.

Most of the major producers have boosted their dividends over the last few months, and a few of them have even linked their dividends directly to underlying metal prices.

In that vein, royalty giant Silver Wheaton Corp. introduced a creative new policy on Wednesday in which its quarterly dividend will equal 20% of the operating cash flow from the previous quarter. That means the current dividend triples to US9¢ a share, equating to a yield of 1%.

To no one's surprise, this policy is getting a thumbs up from analysts. TD Securities analyst Daniel Earle pointed out that since Silver Wheaton's operating cash costs are fixed at about US$4 per ounce of silver sold, there will be "a great deal of predictability" in terms of dividend payments.

"We expect this to enhance the company's attractiveness over silver ETFs, which have been increasing their percentage share of investment flows into the silver sector from approximately 25% when introduced in 2006 to over 60% at present," Mr. Earle wrote.

The Silver Wheaton announcement did not come out of nowhere. Earlier this year, its former chief executive made it clear that the rapidlygrowing company was evolving into a yield story.

SILVER WHEATON CORP. SLW/TSX, $35.85, down 95¢