We have all heard about the rapidly rising price of gold. In order to take part in this potential for profit, it is possible to purchase gold bars or coins and store them, letting their value rise over time as inflation does its thing. However, in the fearful, deflationary period we find ourselves in, I think it makes sense to hedge your gold bets by buying gold stocks that pay dividends. That way you get income while you wait for the "final reckoning."
I chose these stocks because, unlikely many junior miners, these gold producers pay dividends. For example, Newmont Mining pays a dividend tied to the price of gold. Each of these companies has a strong record of exploratory success. When you're dealing with miners, an experienced geological team is of paramount importance. Without consistent development, these gold producers eventually lose stuff to pull out of the ground--and ultimately die (cutting your dividend in the process). Please use this article as a starting point for your own research.
Goldcorp (NYSE:GG) is the second largest producer of gold in the world, based on market value, and as gold prices continue to rise, the company's fourth quarter 2011 profit beat the estimates of analysts. The company engages in the exploration, acquisition, and operation of precious metals properties located in various locations including Mexico, Canada, Central and South America, and the United States.
Although Goldcorp's production dropped by .2% at 2011's end, the fact that the company is considered a low cost producer helps to keep operating costs down and overall profits up, with sales climbing 15% to a record of over $1.5 billion. This is up from just over $1.3 billion one year prior.
Because of this, the company is ready to put more money in investor's pockets. The company's monthly dividend of $.045 comes out to be approximately .10% based on the current stock price of just over $45 per share. I recommend buying this stock, especially if the price were to drop into the range of $40 per share again.
Royal Gold (NASDAQ:RGLD) manages and owns royalties and other related interests primarily on precious metals mines, with a specific focus on gold. The company actually offers investors a great way to obtain value in this industry sector without the need to incur either the risk or the cost that comes with operating mines.
By investing in royalties, the company purchases a percentage of the metal that is being produced from a particular mine. This is done in exchange for an initial payment, and without the need to assume any of the related responsibility for the actual operation of the mine. With a dividend yield of .60, this could be a good income and growth opportunity for investors as the target share price is over $87.
As far as income, the company has been fairly consistent in raising its dividend over the past few years, and in fact has nearly doubled its dividend offered from $.08 in 2009 to $0.15 as of early 2012. I recommend buying shares of Royal Gold.
Yamana Gold (NYSE:AUY), the Canadian based gold producer, has exploration properties in both South America and Mexico. As many other gold mining stocks have been jumping recently, Yamana has jumped along with them - increasing its share price over 4%. Yamana's revenues for 2011 were in excess of $600 million, with a 4% earnings jump in just the fourth quarter of 2011 alone. This earned the company a $0.26 per share upside.
The company's annualized dividend of $.20 provides investors with a nice yield of 1.17%. I disagree with analysts most recent recommendation to hold, as I believe that this one will be a win-win in terms of growth and income.
Newmont Mining Corp. (NYSE:NEM) is primarily engaged in the exploration and production of both gold and copper. This company is somewhat unique in that it has a dividend policy to link the price of its dividend to the price of gold - although this policy was recently enhanced to step up the dividend price to an additional 7.5 cents per share when the company's realized price for gold exceeds $1,700 per ounce in a quarter, plus the addition of another 2.5 cents per share if the realized price of gold for the company is more than $2,000 per ounce. At the present time, the stock is yielding 1.8% to investors.
In preparation of Newmont Mining's 2011 fourth quarter earnings statement, analysts are predicting a rise of nearly 8% over last year. It is also expected that Newmont will have a rise in revenue of approximately 7.5% to $2.74 billion. Although analysts are split on this one between buy and hold, here again I recommend buying - for both growth and income opportunities.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.