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This FTSE 100 dividend growth stock’s fallen 30% in 2019! Is it too cheap to miss?

For those investors seeking dividend growth stocks at great value, the FTSE 100 commodities play Fresnillo (LSE: FRES) is worthy of some serious attention, in my book.

This silver and gold miner has fallen 31% in value since the start of January, a reflection of the huge operational problems that have hammered group production of late and caused levels to miss estimates. These are not just trifling issues, either. In the third quarter, for example, lower ore grades at its Saucito and San Julián mines caused silver output to drop 7.9% from the prior quarter, to 13.3m ounces.

These problems forced the business to cut its full-year production estimates earlier in December. It now expects total silver production to come in at 55m ounces and gold output at 885,000 ounces in 2019, down significantly from the record of 61.8m silver ounces last year and the 923,000 ounces of gold.

Production poised to boom

Fresnillo might be on the defensive right now, but I think the robust outlook for precious metals prices next year means that Fresnillo could prove to be a shrewd contrarian buy for 2020. City analysts expect perky silver and gold values to drive profits at the Mexican digger 37% higher next year.

Such a projection leaves it trading on a dirt-cheap forward price-to-earnings growth (PEG) ratio of 0.6 times and could provide a base for some stratospheric share price gains should the business demonstrate that attempts to supercharge production are starting to bear fruit.

The FTSE 100 business is expected to endure another year of production reversals in 2020, with silver output of 54m ounces and gold output of 857,000 currently anticipated. However, while gold production is expected to keep falling in 2021 and 2022, the amount of silver that it is anticipating pulling out of the ground is expected to balloon (to 66m ounces in 2021 and 71m ounces in the following year) as operational improvements at several of its assets, including those at the flagship Fresnillo mine, come to pass.

Dividends on the march!

One final, but important, thing before you go. With those broker forecasts that Fresnillo’s earnings will rip higher in 2020, come predictions that dividends will soar as well. A predicted full-year reward of 12.4 US cents per share for this year is predicted to rise to 17.5 cents in 2020, a figure that yields an inflation-bursting 2.3%.

Sure there’s bigger yields out there, but it’s possible that dividends here could keep soaring at a better rate than those of many on the FTSE 100 as those planned production refinements ramp up profit growth over the next decade.

Fresnillo clearly isn’t without its risks, but it’s still a share with the capacity to create some stunning shareholder returns in the years ahead. I consider it to be a decent buy at current prices of around 590p.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Fresnillo. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.