Investing in high-quality undervalued stocks may provide investors with lower risks, potential higher returns, and enhanced asset allocation, making it especially suitable for long-term investors and those seeking stable investment returns. Currently, Canadian gold mining stocks, whose stock prices have significantly pulled back, present such an opportunity.
Gold stocks offer investment advantages that many other types of stocks cannot provide, and including gold stocks in a portfolio may help lower overall risk and achieve a certain degree of asset diversification.
Gold is an asset that combats inflation and serves as a hedge. During periods of inflation, the value of gold generally remains relatively stable, making it a hedge against inflation. Additionally, gold can provide risk-adjusted returns, especially in times of economic uncertainty or market volatility, as well as currency depreciation protection and hedging of other risk assets.
The price of gold surged in 2023, reaching a historic high of $2,135 per ounce.
Based on these factors, the undervalued Canadian gold stock that pays generous dividends below is definitely worth considering.
Agnico Eagle Mines Ltd (TSX: AEM) has a market capitalization of CAD 33 billion and is headquartered in Canada, engaging in gold exploration, mining, and production with operations in Canada, Australia, Finland, and Mexico. In 2022, the company acquired gold miner Kirkland Lake Gold.
In terms of performance, Agnico Eagle reported production of 850,000 ounces in Q3 2023 at a cost of less than $900 per ounce. The annual production target for the Detour mine, expected to be a key driver of the company’s revenue growth, is 1 million ounces. Additionally, the company sold 843,000 tonnes of gold at an average price of $1,928, with sales revenue and operating profit reaching $1.6 billion and $883 million, respectively. In the first nine months of the year, the company’s gold production exceeded 2.5 million ounces. The company’s all-in sustaining cost guidance for the year is between $840 and $890 per ounce, with a cash cost of $857 per ounce over the past three quarters. Finally, Agnico’s adjusted earnings per share were $0.44, lower than the same period of the previous year.
As of the end of Q3 2023, Agnico Eagle had $355 million in cash and $1.1 billion in available liquidity under its revolving credit facility. The company’s net debt increased to $1.6 billion, but its net debt-to-EBITDA ratio stood at only 0.5. With a strong balance sheet, this gold stock pays an annual dividend of $2.15 per share, with a dividend yield of 3.2%. It is also worth noting that the company’s dividend has grown by over 300% in the past 8 years.
Agnico Eagle’s current P/E ratio is 20.5, trading at a 50% discount to its average target price from analysts.
