The knock on gold for years has been that it’s not an investment, that it doesn’t produce revenue, pay you interest or dividends. Famed investor, Warren Buffett has been quoted in the past as saying: “It doesn’t do anything but sit there and look at you.”
However, there is a way for investors to gain exposure to the gold market and still generate a yield. Now, it won’t come from buying physical gold bullion or trading gold futures contracts. You can receive income from gold and still benefit off its potential rise by buying gold stocks that offer a dividend.
The beauty behind investing in gold companies that offer dividends is that they tend to be financially stable. Investors can use those proceeds from the dividend to either pay themselves or reinvest the capital and buy more shares.
Here Are Six Gold Stocks That Pay A Handsome Dividend
Harmony Gold Mining Company Limited (NYSE: HMY): The firm engages in the exploration and mining of gold in South Africa and Papua New Guinea. It has nine underground mines, one open-pit operation and several surfaces in South Africa. It’s compliant with 2014 Mining Charter requirements, has low debt, and generates robust margins and earnings.
Harmony Gold owns interests in the Hidden Valley, an open-pit gold and silver mine; the Wafi Golpu project in Morobe province; and the Kili Teke gold-copper exploration project in Papua New Guinea.
The firm has a market cap that exceeds $800M. The company offers investors an annual dividend of$0.07 per share.It’s also one of the most heavily traded gold stocks on the market, average daily volume exceeding 2M shares.
Sibanye Gold Limited (NYSE: SBGL): An independent, global, precious metal mining group, producing a mix of metals that include gold and platinum group metals.
The firm has projects located in South Africa, Zimbabwe, and the United States. It owns and operates four underground and surface gold operations in the West Witwatersand region and the southern Free State province in South Africa. In addition, it owns and manages extraction and processing facilities to produce gold dore.
Sibanye Gold has a market cap that exceeds $2B. They offer investors a $0.41 per share annual dividend . Shares of the company stock are active, with more than 2M shares being exchanged on a daily basis.
Gold Fields Limited (NYSE: GFI): Recognized as a globally diversified producer of gold with eight operating mines in Australia, Ghana, Peru and South Africa.
The firm has an annual gold-equivalent production of approximately 2.2M ounces. In addition, it has attributable gold mineral reserves of around 48M ounces and gold mineral resources of around 101M ounces.
Gold Fields has consistently had sales surpassing $2B annually over the last several years. It has a market cap that exceeds $3B. The company offers investors an annual dividend of$0.06 per share. Shares are highly liquid, with more than 4M trading on a daily average.
Royal Gold, Inc. (NASD: RGLD): The company is engaged in the acquisition, and management of precious metals streams and royalties. It primarily focus on gold, and has a portfolio consisting of 39 producers and 23 development-stage royalties or small interests.
The corporation holds stream and royalty interests in the United States, Canada, Chile, the Dominican Republic, Ghana, and Mexico.
The firm’s stock price has been consistently outperforming the S&P 500 and the price of gold for years.
Royal Gold has a market cap that exceeds $5B. They offer investors an annual dividend of $1 per share.
DRD Gold Limited (NYSE: DRD): A mid-tier, unhedged gold producer with a rich history in the industry dating back to 1895. The firm is known as leader in surface gold tailings retreatment. It recovers gold from surface tailings in the central and western Witwatersand basin in Gauteng Province.
In 2016, the company produced 143,457 oz and declared mineral resources of 50.6M ounces and mineral reserves of 1.8M ounces.
Despite its rich history, DRD Gold has a relatively small market cap, at 130M+ However, it still manages to give investors an annual dividend of $0.12 per share.
AngloGold Ashanti Limited (NYSE: AU): Operating as a gold mining and exploration company. Its portfolio includes 17 mines in South Africa, Continental Africa, Australasia, and the Americas.
In the half year of 2017, the company produced 1.748M ounces of gold.
Source: AngloGold Ashanti Limited
One of the ten largest gold miners in the world based on market cap. The company offers investors an annual dividend of $0.10 per share.
Considerations When Investing In Gold Dividend Stocks
Warren Buffett has only once offered a dividend in his company stock, Berkshire Hathaway. His belief is that the cash should go into the business and reward shareholders through its stock performance.
That said, gold companies must operate their businesses efficiently. If the company isn’t managed correctly and starts to get into financial trouble, most likely they’ll look to cut their dividend.
You want to invest in a gold company that is managed correctly and operates at a free cash flow. Free cash flow is a measure of a company’s financial performance, calculated as operating cash flow minus capital expenditures.
The best gold stocks that pay a dividend are looking for ways to cut costs. Investing in new and better technology is crucial if they want to improve efficiency.
Other concerns include safety. In one their half-year 2017 highlights, AngloGold Ashanti was proud that it had its third consecutive fatality-free quarter.
Since many of the companies operate globally, its important to pay attention to politics. Some operate in conflict-ridden parts of the world. They most adhere to environmental laws.
Bottom Line
Receiving a dividend is a great perk for an investor. However, the dividend alone should not be the reason why invest in the stock.
You’ll want to investigate their projects, and find out how sensitive they are to the price changes of gold. You see, the most efficient companies can profit even if gold prices see a slight decline. Their costs to produce gold can be significantly lower than the spot price.
Take the time to visit company websites and read financial statements.
Investing in gold companies offers optionality, not only can its stock benefit from a rise in gold prices but it can potentially outperform the precious metal.
