In recent times, Costco has witnessed a remarkable surge in demand for its gold bullion offerings. According to a recent Bloomberg survey, an impressive 77% of the 101 surveyed Costco locations reported selling out of gold bars within the last month. This trend emerges amid growing interest from investors seeking a tangible asset as a hedge against market volatility, particularly with concerns surrounding the economy. However, purchasing gold bullion isn’t necessarily the best way to capitalize on the asset’s potential growth.
While outright ownership of gold bars can provide a sense of security, it only translates into actual financial gains if the price of gold continues to rise. For investors looking for a more dynamic approach to gold investing, it might be far more advantageous to consider dividend-paying gold stocks. Here, we explore three standout companies: Agnico Eagle Mines, Centerra Gold, and Franco-Nevada—each offering unique value propositions for those seeking exposure to the gold market.
Agnico Eagle Mines stands out as a stalwart in the gold mining space, boasting a 60-plus-year history of reliable production. With 11 operating assets across multiple countries, it anticipates a gold production of around 3.45 million ounces for 2024. The company is not just a gold producer; it’s also a frequent rewarder of its shareholders, having consistently paid dividends for 41 years. Projected dividends for 2024 are expected to be $1.60 per share, reflecting an impressive compound annual growth rate (CAGR) of over 23% since a mere $0.03 per share in 2005. With a solid investment-grade balance sheet and a payout ratio averaging 64% over the last five years, Agnico Eagle represents a safe investment for those seeking passive income.
Centerra Gold, despite its $1.5 billion market cap, shines brightly in terms of its shareholder returns. This lesser-known gem boasts an attractive forward yield of 2.9%, making it one of the more appealing dividend stocks in the gold sector. Currently priced at 4.3 times its operating cash flow, shares of Centerra are trading at a discount relative to their historical five-year average. The company enjoys a debt-free balance sheet, with $592 million in cash, providing a sound financial foundation. Centerra’s future also looks promising as it continues to grow its molybdenum business, with plans to ramp up production significantly at its Langeloth facility, which is projected to boost earnings considerably.
Franco-Nevada offers a distinctive approach to gold investment through its royalty and streaming model. By providing upfront capital to gold mining companies, it secures a percentage of sales or rights to future production at predetermined prices. This strategy mitigates some of the risks inherent in traditional mining operations. With a portfolio of 432 projects, Franco-Nevada has a robust framework, with numerous ventures in various stages of development, ensuring long-term growth potential. Gold remains central to its operations, contributing to a hefty 61% of quarterly revenue. Although its forward yield stands at a modest 1.2%, Franco-Nevada has demonstrated a strong commitment to its investors, with 17 consecutive years of dividend increases.
For those eager to diversify their portfolio with gold investments, purchasing bullion from Costco may not be the most strategic route. Instead, investing in dividend-bearing stocks like Agnico Eagle or Centerra offers a more compelling opportunity, especially considering Centerra’s current discounted price. Meanwhile, Franco-Nevada provides a solid alternative for conservative investors looking to remove some of the risks associated with developing mining assets.
As you contemplate entering the world of gold investing, consider that with Agnico Eagle’s stability, Centerra’s lucrative dividends, and Franco-Nevada’s unique financing model, these three companies can offer a robust defense against economic fluctuations while enhancing your investment portfolio with gold asset exposure.
When evaluating whether to invest in these companies, remember to conduct thorough research and consider the balance of risk and rewards they offer. With the right choices, you can potentially add significant value and resilience to your portfolio in these uncertain times.