Gold prices hit a three-month high recently, driven by growing speculation of impending interest rate cuts by the Fed. As prices are poised to escalate further in the foreseeable future, it could be a prime time to watch quality gold stocks DRDGOLD (DRD), Alamos Gold (AGI), and Dundee Precious Metals (DPMLF) for steady income. Read on….
Historically, gold has been lauded for its enduring stability and its inherent ability to retain value over the long term. Given its reputation as a safeguard against financial uncertainties, the recent gold price surge – spurred by geopolitical turmoil, the softening dollar, anticipations of an interest rate cut, and weaker-than-predicted U.S. manufacturing data – sets the stage for the precious metal to remain resilient in the upcoming months.
So, investors could buy dividend-paying gold stocks Alamos Gold Inc. (AGI) and Dundee Precious Metals Inc. (DPMLF) for steady returns, while DRDGOLD Limited (DRD) could be watched now.
In the last few months of 2023, gold prices surged after a powerful rally sparked by central bank purchasing and investors’ rising tension over geopolitical conflicts. A fall in the U.S. dollar and expectations of rate cuts by the Federal Reserve bolstered bullion prices, which hit a record high of $2,135.39 per ounce in December 2023.
Recently, gold prices hit a three-month peak, fueled by growing anticipation of a June interest rate cut by the U.S. Fed. Additionally, spot gold witnessed a 1.4% increase, reaching $2,113.28 an ounce, hitting its highest since December 2023.
As per J.P. Morgan, gold prices will peak at $2,300/oz in 2025, assuming a Fed cutting cycle initially providing 125 basis points of cuts over the second half of 2024, pushing gold prices to new nominal highs.
Economist David Rosenburg projects an 85% probability of a recession in the U.S. within the next 12 months. Despite contrary beliefs from his peers, asserting that the U.S. can sidestep a recession, it is indisputable that economic expansion is sluggish. The ongoing wars have added an extra layer of volatility. Investors often regard secure assets, like gold, as a safe haven due to their inherent hedge attributes during uncertain times. This could prove beneficial for gold.
Consequently, the global gold market is expected to reach $4.50 trillion by 2032, growing at a CAGR of 3.8%.
In light of these encouraging trends, let’s look at the fundamentals of the three Miners – Gold stocks, starting with the weakest from the investment point of view.
Stock #3: DRDGOLD Limited (DRD)
Headquartered in Johannesburg, South Africa, DRD engages in the surface gold tailings retreatment business in South Africa. It is also involved in the exploration, extraction, processing, and smelting activities.
On February 14, DRD declared an interim dividend of 20 SA cents for the six months that ended December 31, 2023, matching the interim dividend of the six months that ended December 31, 2022. This marks DRD’s 17th consecutive year of dividends.
It pays an annual dividend of $0.45 per share, which translates to a dividend yield of 6.07% on the current share price. Its four-year average yield is 4.90%. DRD’s dividend payments have grown at a 61.3% CAGR over the past five years.
DRD’s trailing-12-month CAPEX/Sales of 31.51% is 317.8% higher than the industry average of 7.54%. Its trailing-12-month EBIT and net income margins of 24.72% and 22.97% are 119.4% and 347.6% higher than the industry averages of 11.27% and 5.13%, respectively.
For the six months that ended December 31, 2023, DRD’s revenue and gross profit from operating activities stood at ZAR2.97 billion ($156 million) and ZAR762.50 million ($39.99 million), up 12.1% and 14% from the prior-year period, respectively.
For the same quarter, its profit for the period and basic earnings per share increased 10.1% and 9.5% from the year-ago period to ZAR589.30 million ($30.91 million) and 68.10 SA cents, respectively.
Street expects DRD’s revenue for the fiscal year ending June 2024 to increase 8.4% year-over-year to $317.25 million. Its EPS is expected to be $0.67 for the same year.
The stock has gained 5.2% intraday to close the last trading session at $7.75. Over the past month, it has lost 1.8%.
DRD’s fundamentals are reflected in its POWR Ratings. The stock has an overall C rating, equating to Neutral in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has a B grade for Value. Within the Miners – Gold industry, it is ranked #11 out of 40 stocks.
To see additional POWR Ratings for Growth, Momentum, Stability, Sentiment, and Quality for DRD, click here.
Stock #2: Alamos Gold Inc. (AGI)
Headquartered in Toronto, Canada, AGI acquires, explores, develops, and extracts precious metals in Canada and Mexico. The company primarily explores for gold and silver deposits.
On February 28, AGI’s Board of Directors declared a quarterly dividend of $0.03 per common share. The company has paid dividends for 15 consecutive years, during which time $334 million has been returned to shareholders through dividends and share buybacks, including $39 million in 2023.
The dividend is payable to shareholders on March 28. It pays an annual dividend of $0.10 per share, which translates to a dividend yield of 0.81% on the current share price. Its four-year average yield is 0.95%. AGI’s dividend payments have grown at CAGRs of 15.4% and 58.5% over the past three and five years, respectively.
AGI’s trailing-12-month CAPEX/Sales of 34.10% is 352.1% higher than the industry average of 7.54%. Its trailing-12-month EBIT and net income margins of 31.09% and 20.52% are 175.8% and 300% higher than the industry averages of 11.27% and 5.13%, respectively.
For the fiscal fourth quarter that ended December 31, 2023, AGI’s operating revenues and earnings before income taxes stood at $254.60 million and $71.90 million, up 9.8% and 16.7% year-over-year, respectively.
For the same quarter, its net earnings and earnings per share increased 16% and 20% from the year-ago quarter to $47.10 million and $0.12, respectively.
Street expects AGI’s revenue and EPS for the fiscal first quarter ending March 2024 to increase 8.2% and 16.6% year-over-year to $272 million and $0.13, respectively. The company surpassed consensus EPS estimates in each of the trailing four quarters and consensus revenue estimates in three of the trailing four quarters, which is impressive.
The stock has gained 23.1% over the past year to close the last trading session at $12.84. Over the past nine months, it has gained 4.6%.
AGI’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, equating to Buy in our proprietary rating system.
AGI has a B grade for Sentiment and Quality. Within the same industry, it is ranked #10.
Beyond what we’ve stated above, we have also rated the stock for Growth, Value, Momentum, and Stability. Get all ratings of AGI here.
Stock #1: Dundee Precious Metals Inc. (DPMLF)
Headquartered in Toronto, Canada, DPMLF acquires mineral properties and explores, develops, mines, and processes precious metals. It owns and operates a gold, copper, and silver mine.
On February 14, DPMLF’s Board of Directors declared a first-quarter dividend of $0.04 per common share, payable to shareholders on April 15. It pays an annual dividend of $0.16 per share, which translates to a dividend yield of 2.28% on the current share price. Its four-year average yield is 1.89%. DPMLF’s dividend payments have grown at a 21.1% CAGR over the past three years.
Additionally, during 2023, DPMLF returned $95.80 million, or 42% of free cash flow, to shareholders through dividends paid and shares repurchased.
DPMLF’s trailing-12-month cash per share of $3.28 is 131.9% higher than the industry average of $1.42. Its trailing-12-month net income and levered FCF margins of 37.10% and 27.04% are 623% and 466.8% higher than the industry averages of 5.13% and 4.77%, respectively.
In the fiscal fourth quarter that ended December 31, 2023, DPMLF’s revenue and adjusted EBITDA increased 23.3% and 36.7% year-over-year to $139.30 million and $79.63 million, respectively.
For the same quarter, its adjusted net earnings and adjusted basic earnings per share stood at $55.47 million and $0.31, up 66.5% and 72.2% from the prior-year quarter, respectively.
Street expects DPMLF’s revenue for the fiscal year ending December 2024 to increase 5.3% year-over-year to $547.43 million.
The stock has gained 12.5% over the past six months to close the last trading session at $7.15. Over the past month, it has gained 12.1%.
DPMLF’s robust prospects are reflected in its POWR Ratings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system.
DPMLF has an A grade for Quality and a B for Value. It is ranked first within the same industry.
Click here for the additional POWR Ratings for DPMLF (Growth, Momentum, Stability, and Sentiment).
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AGI shares were unchanged in premarket trading Tuesday. Year-to-date, AGI has declined -4.68%, versus a 7.78% rise in the benchmark S&P 500 index during the same period.
About the Author: Neha Panjwani
From her school days, Neha harbored a profound fascination for finance, a passion that steered her toward a career as an investment analyst following the completion of her bachelor’s degree in commerce. Currently enrolled in the CFA program, Neha is dedicated to further enriching her comprehension of investment fundamentals.
Neha’s primary objective is to aid retail investors in discerning optimal investment opportunities by diligently evaluating crucial aspects of financial instruments, with a primary focus on stocks and ETFs. Her commitment lies in empowering individuals to make informed and strategic investment decisions in the dynamic world of finance.
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