Gold prices have declined about 9% since February of this year to the current level of $1,605 a troy ounce. This slide has dragged down stock prices of gold producers. Despite the decline in bullion's price and the recent downward revisions to price forecasts, expectations of gold prices generally remain bullish. Several major investment banks, including UBS, Bank of America Merrill Lynch, and Goldman Sachs expect gold prices in a range between $1,680 and $2,000 a troy ounce over the next year. Expecting a rebound in prices, Standard Bank of South Africa sees the current price levels as good entry points for bullion investors. Stock investors can leverage their exposure to the gold market vis-à-vis investments in several dividend-paying stocks. Therefore, with prices of several gold miners hitting new 52-week lows, now may be a good time to accumulate positions in the following dividend gold plays.
Anglo-Gold Ashanti (AU) is a $12.5 billion gold producer whose price has declined 30% since the beginning of February 2012 to its 52-week low of $32.47 a share. Anglo-Gold Ashanti pays a $1.06 dividend with a lucrative 3.27% yield, which is well above the industry's average of 1.9% and the S&P500's of 2.0%. The company's dividend payout ratio is at a low 25%, based on the expected 2012 earnings per share of $4.24. Anglo-Gold Ashanti boasts a current P/E of 9.7x and the forward ratio of only 7.2x, below the gold mining industry's current and forward P/Es of 30x and 10.2x, respectively.
Several fund managers, including Mario Gabelli of GAMCO Investors, John Hussman of Hussman Econometrics Advisors, and John Paulson of Paulson & Co. are major investors in the company. Last year Gabelli and Hussman accumulated the stock at an average price of $43.88 and $45.90 a share, respectively (In the first quarter, Hussman reduced his stake in the company by selling at a price of $39.13 per share.) Paulson accumulated the stock in the prior years at much lower prices.
Newmont Mining (NEM) is a $22 billion gold and copper miner whose price has declined 29% since February 2012, and 37% since the stock peaked in early November 2011. The stock is currently trading for $44.70 a share, which is $0.50 away from its 52-week low. Newmont Mining pays $1.40 in dividends annually, which translates into a dividend yield of 3.0%. This yield is 110 basis points above that on the industry's peers on average and a full percentage point above the S&P500's. The company's dividend payout ratio is currently at 29% of the 2012 estimated earnings. The gold producer has a current P/E of 10.2x and a forward P/E of 9.1x, well below the industry and the S&P500.
In the first quarter 2012, Arnold Van Der Berg of Century Management acquired a new stake in the company at an average price of $55.23 a share. Jean-Marie Eveillard of First Eagle Investment Management and John Hussman of Husman Econometrics Advisors were adding to their positions in Newmont at average prices of $65.11 and $60.11 a share, respectively. (In the first quarter 2012, Hussman reduced his holdings of this stock at an average price of $55.23 a share.)
Freeport-McMoran Copper & Gold (FCX) is a $34 billion copper and gold producer. Its stock price has declined 23.4% since early February 2012. The stock is currently changing hands at $35.6 a share, which is still well above the stock's 52-week low of $28.9 a share. Freeport-McMoran pays an annual dividend of $1.25 a share, with a yield of 3.4%, which is well above the industry and the S&P500 averages. The payout ratio is currently at 31% (including the ratio using the full-year 2012 earnings estimates). The company boasts a trailing-twelve-month earnings P/E of 8.9x and a forward P/E of 6.8x, well below the ratios for the industry as a whole and the S&P500.
Ken Fisher of Fisher Asset Management acquired a position in Newmont Mining in the first quarter 2012 at an average price of $39.5 a share. The renowned financier, George Soros, of Soros Fund Management and Chris Davis of Davis Selected Advisers added Newmont Mining in the fourth quarter at an average price of $37.5.
Gold Fields (GFI) is a $9.1 billion gold exploration and production company, ranked South Africa's second largest after Anglo-Gold Ashanti. The company's stock has fallen 25.4% since late January and is currently trading at $12.62 a share, close to its 52-week low of $12.15. This gold producer pays an annual dividend of $0.61 a share, which translates into a rich 4.8% dividend yield. The yield on the Gold Fields' stock is nearly three percentage points above the industry and S&P500 averages. The dividend payout ratio equals a low 20%. The gold producer has a current P/E of 9.2x and a forward P/E of 7.9x, which are more attractive than valuation of the gold producing industry and the S&P500 on average.
In the fourth quarter 2011, Mario Gabelli added shares of Gold Fields to his portfolio at an average price of $16.12 a share. George Soros closed his stake in the company in the fourth quarter, while John Hussman substantially reduced his holdings of the company's stock in the first quarter 2012 (see George Soros' top picks).
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.