Franco-Nevada (NYSE: FNV) went public in the U.S. market more than a decade ago, and over that time, the company has established itself as a major player in an important niche in the natural resources industry. Franco-Nevada neither mines gold nor drills for oil, but by helping to finance projects that mining companies and oil drillers want to pursue, it ensures it can get a cut of the profits. That's been a winning business model lately, and throughout its history as a publicly traded company, Franco-Nevada has stood out for one thing that it's done consistently well: paying and raising its dividend regularly over time.

Coming into Wednesday's first-quarter earnings report, Franco-Nevada investors had modest expectations for favorable performance on the precious-metals streaming specialist's top and bottom lines. Franco-Nevada did far better than most had expected in producing earnings growth, and executives have high hopes for the rest of the year.

Image source: Franco-Nevada.

Franco-Nevada starts 2018 strong

Franco-Nevada's first-quarter results were encouraging. Revenue was up just a fraction of a percent to $173.1 million, but that was still better than the slight decline that most of those following the stock were expecting. Net income showed much better results, rising 43% on an adjusted basis to $63.9 million. That worked out to adjusted earnings of $0.34 per share, which was quite a bit better than the consensus forecast among analysts for just $0.27 per share on the bottom line.

From a production standpoint, Franco-Nevada's shift toward greater oil and gas exposure proved vital to its sustained growth. Total precious-metals production was off more than 15,000 gold equivalent ounces to about 113,400 ounces, with double-digit-percentage declines in gold, silver, and platinum-group metals. Production of other minerals also was down, cutting total metals production by 12% to 115,671 gold equivalent ounces. Yet the oil and gas segment saw revenue jump by nearly three-quarters to $19 million, and that single-handedly helped Franco-Nevada post record revenue despite the production drop.

Franco-Nevada's product mix has shifted. Precious metals accounted for 87% of production, leaving energy to pick up the rest. The breakdown within metals was 68% gold, 14% silver, and 5% platinum-group metals. Geographically, more than 80% of revenue came from the Americas, split roughly evenly between Latin America and the northern part of North America, combining the U.S. and Canada.

CEO David Harquail praised the company's progress. "Franco-Nevada's diversified portfolio continues to deliver," Harquail said, "with record quarterly revenue and net income being realized in the first quarter." The CEO also said that Franco-Nevada's debt-free balance sheet gives it plenty of opportunities to capitalize on future project financing.