Gold Stocks that Pay Dividends – Best Gold Dividend Stocks for 2019
Buying physical gold is a proven way to hold and store wealth. However, gold bullion does not generate income. The only way to realize any profit is to sell the gold. Those who like getting income from their investment portfolios tend to love dividend stocks. This is because they pay reliable streams of income to shareholders, and also retain the potential for growth. Owning Gold stocks is a way to enjoy increases in the price of gold with growth potential if the stock itself appreciates in value. Wouldn’t it be great to have the security of owning gold AND the growth potential of stock appreciation AND a steady stream of income in the form of regular dividend payouts? It’s possible, and you can do this by investing in gold stocks that pay dividends.
The mining industry is a capital-intensive one, and that makes it hard for most stocks that focus on gold, silver, and other precious metals to pay much in the way of dividends. Still, some companies in the gold industry are able to pay dividends that are at least respectable. If you are interested in gold stocks that pay dividends, pay attention to the stocks below. They are gold stocks that not only pay solid dividends, they still have the potential for future growth. Some are traditional miners, while others use a business model other than mining to get exposure to precious metals. They are known as Gold Royalty Streaming Companies…
Gold Royalty Streaming Companies
There are many ways to gain exposure to the upside potential in precious metals. One of the most secure ways to gain leverage to increasing silver and gold prices are royalty and streaming companies. The idea behind a Royalty Streaming company is simple. Finding operating capital can be difficult when a promising mine is in a pre-production stage. Raising money can also be hard in a difficult financial market or when commodity prices are stagnant. R&S companies enter the picture, and offer capital – for production royalties down the road.
A metal stream is a purchase agreement. In exchange for an upfront deposit payment, it provides the right to purchase all or a portion of one or more metals produced from a mine. The price is pre-determined for the life of the transaction by the purchase agreement. Metal stream acquisitions are often larger in size than royalty acquisitions, have more flexibility in the negotiation of terms and conditions, and generally provide both parties with tax advantages. A royalty, on the other hand, is the right to receive a percentage or other denomination of mineral production from a mining operation. A royalty agreement does not require the actual purchase of the metals produced by the mine.
This arrangement is a big win for both parties. It provides a stable business model where initial funds are made available only to be paid back once the mine is in actual production. Royalty companies are long-term growth opportunities that dividend investors seek out. Longer-term investors, like retirees or those managing a diversified industry portfolio, tend to prefer owning mining stocks with lower volatility and more consistency in the business. Royalty Streaming Companies are gold stocks that pay dividends and tend to be easier to manage in a portfolio.
Gold Stocks That Pay Dividends
Newmont Mining (NYSE:NEM)
Newmont Mining (NEM) recently announced that it was going to buy Goldcorp (GG) for $10 billion. This mega deal will create the largest gold producer in the world, which will be known as Newmont Goldcorp.
Newmont is set to purchase Goldcorp for $10 billion, and the combined company will become the largest gold producer in the world. The deal is particularly attractive to investors who consider gold being in the very early stages of a major bull market cycle. With rising gold prices, Goldcorp’s assets should appreciate considerably in future years, and the company is likely to become more efficient under Newmont’s management. The recent 12% selloff in Newmont is a gift to shareholders looking to increase their positions and for potential investors looking to enter Newmont stock.
Shareholders of Newmont and Goldcorp will own about 65% and 35% of the combined entity respectively. The transaction, which will be implemented by way of a court-approved plan of arrangement under the Ontario Business Corporation Act, is expected to close in the second quarter of 2019. As part of this combination, Newmont Goldcorp plans to make new investments in a reinvigorated exploration program in Canada and provide ongoing and long-term employment for highly skilled jobs at its properties in the country.
Newmont Mining has consistently paid fixed dividend amounts for a range of gold price points. This policy offers security and predictability to gold investors. As the majority partner, Newmont issues gold stocks that pay dividends. The joint entity is not expected to change the dividend policy going forward.
Gold royalty streaming describes an arrangement where a streaming company provides cash up front to a mining company for the right to buy gold at reduced prices in the future. Franco-Nevada is a premier gold streaming company. Its royalty business model limits the risk it takes in the gold mining business.
Streaming companies don’t get their hands dirty trying to operate mines. Instead, they provide cash to miners to help them run their businesses. An agreement between a miner and a streaming company can be reached at any point. This includes a mine that’s still only on the drawing board to one that’s already producing. Streaming, however, isn’t all that unique. The oil and gas industry has used a similar model for a very long time. The model wasn’t really used in precious metals mining, however, until the 1980s. Franco-Nevada Corp was among the first in the mining space.
Royalty streaming companies are usually considered more secure than pure mining operations. Franco-Nevada boasts nine consecutive years of dividend increases thanks to rapidly growing profits and cash flows backed by a diversified portfolio. The company also deals in platinum group metals, as well as oil and gas. Franco-Nevada projects its gold equivalent ounces production to rise roughly 14% by 2021 thanks to several newly acquired streams.
Royal Gold (NASDAQ:RGLD)
Royal Gold Inc. (RGLD) is another precious metal streaming and royalty company. It provides necessary upfront financing for mining companies and mine operators. In exchange, Royal Gold has the right to purchase precious metals at below market rates. For an investor who doesn’t want to own gold bullion but wants to have some gold exposure in his/her portfolio, then holding such a company makes sense. A “streamer” has a safer business model than a single mine stock because of its diversified portfolio and presents more potential for growth that the physical gold can provide.
Royal Gold is a solid choice for gold stocks that pay dividends. It has a 16-year record of dividend increases. Royal Gold is not a miner; it is a royalty streaming company. Royal Gold finances other mining companies up front and buys metal streams at low prices in return. With this business model, Royal Gold doesn’t have to spend money extracting metals and can secure metals at low prices.
Alamos Gold (AGI)
Alamos Gold (AGI) has reported a 17% increase in gold production year-over-year. The company’s 2019 production outlook is focused on increased output from lower-cost mines and decreased output from comparatively higher-cost mines. AGI is showing strong fundamentals and a growth opportunity. Like all companies operating in the gold sector, all it requires is support from gold prices to sustain the current momentum in share prices. Based on a price-to-tangible book ratio, analysts believe AGI is trading at a discount.
Alamos Gold (AGI) has posted a record full year of production that is above the previous year’s output. Moreover, the company’s FY 2019 outlook is better than FY 2018 in terms of higher production from lower cost mines and decreased production from comparatively higher cost mines. The company plans to revamp its production potential by 2021. This includes plans to incur significant capital expenditure without adding any debt. This could improve shareholder returns in future. AGI’s valuation is considered cheap at current prices. However, despite its solid fundamentals, AGI’s short-term price appreciation would largely depend on a continued bullish run in the gold market.
Agnico Eagle Mines Ltd (NYSE:AEM)
Agnico Eagle Mines (AEM) has 34 years of dividend history. The miner hasn’t missed a dividend since 1983. It increased its dividends by 25% last year. There is potential for Agnico to boost its dividends further given its free cash flow position.
The company is known for its stable mine assets that are performing above targets and are located in a low political risks environment. The political environment is often overlooked. Yet, it is a crucial element that can be of paramount importance for the financial stability of a miner long term. Also, Agnico Eagle’s growing gold reserve with improving gold grades justify a healthy future production growth that will reach 2.0 million ounces of gold in 2020. This increase in production is projected to use assets that are already owned. Any capital expenditure is expected to be funded by operating cash flow starting in 2019.
Kirkland Lake Gold Ltd. (NYSE:KL)
Kirkland Lake Gold Ltd (KL) is a mid-tier gold producer operating in Canada and Australia. The company is on track to achieve significant production growth over the next three years. This includes target production of 740,000 – 800,000 ounces in 2019, 845,000 – 910,000 ounces in 2020 and 945,000 – 1,005,000 ounces in 2021. The production profile of the Company is anchored by two high-grade, low-cost operations, including the Macassa Mine located in Northern Ontario and the Fosterville Mine located in the state of Victoria, Australia. Kirkland Lake Gold has a solid base of quality assets with exploration and growth potential. The company is supported by a strong financial position with extensive management and operational expertise.
Currently, Kirkland has four operating mines: three in Canada (Macassa, Taylor and Holt) and Fosterville in Australia. Of these four operations, the Fosterville mine is the largest one.
Outlook for Gold 2019
The World Gold Council (WGC) predicted that global investors will “continue to favor gold as an effective diversification hedge against systemic risk in 2019.” The rise in protectionist policies around the world is chief among the risks since they tend to lead to higher inflation and slower economic growth over the long term, according to the WGC.
Goldman Sachs raises its gold forecasts to $1,325, $1,375 and $1,425 per troy ounce over the next three, six and 12 months respectively. Based on gold’s current price, that forecast represents a 10.7 percent increase over the next 12 months. “Going forward gold will be supported primarily by growing demand for defensive assets. The same is also true of central bank buying, with rising geopolitical tensions incentivizing more central banks to re-enter the gold market,” according to Goldman’s Jeffrey Currie
Gold bullion does not generate income. The only way to realize any profit is to sell the gold. Owning Gold stocks is a way to enjoy increases in the price of gold with growth potential if the stock itself appreciates in value. An attractive scenario is to invest in gold stocks that pay dividends.
One of the more secure ways to gain leverage to increasing silver and gold prices are royalty and streaming companies. Royalty companies are long-term growth stories that growth & dividend investors seek out. Streaming companies don’t get their hands dirty trying to operate mines. Instead, they provide cash to miners to help them run their businesses in exchange for production royalties down the road. Royalty streaming companies are usually considered more secure than pure mining operations. Likewise, the dividends paid by royalty streaming companies are considered more secure than dividends from pure mining operations.
More About Gold Stocks That Pay Dividends…
Click here for more information on Gold Mining Stocks and Gold Penny Stocks: 7 Gold Penny Stocks That Trade on the NYSE.
Penny stocks for gold mining companies offer an interesting way participate in future increases in the price of gold. Low-priced gold penny stocks could shine in the coming months while the stock market grapples with global trade wars, geopolitical tension and rising inflation. Penny stocks issued by small companies are not usually traded on the regular stock exchanges. Instead, small cap penny stocks are usually traded over-the-counter, where financial reporting is not required and usually non-existent. Here are seven gold penny stocks trading under $5 that are subject to all the financial and reporting requirements as dictated by the NYSE and NASDAQ.
For more information on High yielding dividend stocks check out: High Yielding Dividend Stocks – 5 Top Paying Dividend Stocks for 2019
This commentary should not be considered a solicitation or offering of any investment product. Certain materials in this commentary may contain dated information. The information provided was current at the time of publication.