In this Article
- Barrick Gold Corp. (GOLD): The world’s second-largest gold producer remains attractive because it isn’t overbought.
- Kinross Gold (KGC): Kinross expects a nearly 30% increase in gold production this year.
- Wheaton Precious Metals (WPM): The firm’s unique business model, strong dividend policy and strong results make it a worthy investment in gold.
There are several reasons investors move towards gold. Gold has a long history as a valuable commodity that maintains its value over time. But it also acts as an important bulwark against other current and relevant factors. Gold is seen as a hedge against both deflation and inflation, the latter of which we are all well aware of.
March inflation rates reached 8.5%, ahead of 8.4% expectations and up from 7.9% in February. That inflation can be seen across just about everything consumers purchase. Fuel, food, housing, transportation, you name it. And that makes gold — as a traditional inflation hedge — increasingly attractive.
Gold is also seen as a global store of value. That is important in times of geopolitical and macroeconomic uncertainty. In other words, the exact times we are currently experiencing. If the value of our dollar drops, gold becomes more attractive.
That leaves investors considering how gold can help lessen the blow. And one way investors can expose themselves to gold is through gold stocks.
|GOLD||Barrick Gold Corporation||$23.68|
|KGC||Kinross Gold Corporation||$5.50|
|WPM||Wheaton Precious Metals Corp.||$47.80|
Barrick Gold Corp. (GOLD)
Toronto-based Barrick Gold Corp. (NYSE:GOLD) isn’t a pure-play gold stock as it also mines copper. However, it is among the largest producers of gold globally. It is ranked second among gold stocks behind only Newmont (NYSE:NEM) in terms of both production and market capitalization. One of the reasons Newmont is not on this list is simply that it is currently oversold, trading well above its average consensus target price.
But back to Barrick. The company is basically a very steady investment from a fundamental perspective. In both 2020 and 2021 Barrick Gold recorded net earnings above $2 billion.
One of the primary reasons investors should consider Barrick Gold is the mines it operates. Those mines span a global footprint including North America, Latin America, Asia, Africa and the Middle East.
The firm believes it will mine between 4.2 to 4.6 million ounces of gold this year. It has an expected breakeven price when gold trades between $1,020 per ounce to $1,120 per ounce. Gold prices have steadily maintained per ounce prices above $1,800 throughout 2021 and don’t look to change soon.
Kinross Gold (KGC)
Kinross Gold (NYSE:KGC) is a gold exploration and development firm. That means it operates mines for their gold bearing assets. It maintains a portfolio of properties across the U.S., Russia, Brazil, Chile, Ghana and Mauritania.
A significant reason to consider investing is that Kinross expects to produce 2.65 million ounces of gold in 2022. If that happens, it will represent a 28% increase over the firm’s 2021 production of 2.07 million ounces of gold. Given that gold prices have remained steadily high in 2021 and 2022, that means Kinross should see increasing revenues. The company also believes production will reach 2.8 million ounces in 2023 and that it will result in significant growth in free cash flow.
Investors should consider Kinross Gold a long-term play on gold as the company expects an average of at least 2.5 million annual ounces of gold production through 2030.
Wheaton Precious Metals (WPM)
Wheaton Precious Metals (NYSE:WPM) is the most diversified producer among the three stocks listed here. It operates in gold, silver, palladium, cobalt and other metals.
For gold investors seeking dividends, Wheaton Precious Metals makes a lot of sense. That’s because the company has more than doubled its total dividend payment from 2016 to 2020.
Wheaton Precious Metals follows a business model that differs from the previous firms listed in this article. It is a streaming company, which means that it purchases a percentage of metal production from a mine at a given price. It then sells into the prevailing markets hoping to realize a gain.
That business model proved successful in 2021 as the firm realized a 9.6% increase in revenue that resulted in a 48.5% increase in net earnings. Moving back to dividends, the improvement was positive. The company increased its dividends paid by 35.7% in 2021.
The company expects to receive between 350,000 to 380,000 ounces of gold from its streaming contracts in 2022. As long as prices remain high, Wheaton Precious Metals remains an interesting gold stock to consider.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.