Canadian investors may consider buying shares of Wheaton Precious Metals Corporation (Wheaton Precious Metals) and other high-quality mining stocks in June 2024. Investing in mining stocks provides exposure to the commodities mined by these companies. For example, the performance of gold miners is typically closely tied to the performance of gold.
Mining stocks refer to companies focused on the exploration, extraction, and processing of precious minerals such as gold, silver, copper, and lithium. These metals are crucial to the global economy as they are key raw materials for various industries manufacturing products and infrastructure.
Due to the cyclical nature of commodity prices, identifying companies with low-cost operations, strong balance sheets, and the ability to withstand economic downturns is crucial. Wheaton Precious Metals Corporation (TSX: WPM) is one such Canadian mining stock worth buying and holding indefinitely. Wheaton has a market capitalization of $33 billion and sells precious metals in the Americas and Europe. It produces and sells gold, silver, palladium, and cobalt ores.
Wheaton is one of the largest precious metals streaming companies with a portfolio of long-life, low-cost assets. Compared to traditional mining companies, its business model provides investors with exposure to commodity price leverage and exploration upside with lower risks.
Wheaton benefits from higher operating profit margins compared to its peers, allowing it to pay shareholders $0.85 per share in dividends annually, yielding a forward yield of 1.2%. Moreover, the dividend grows at a rate of 16% annually, which is rare for a cyclical industry company.
Over the past decade, Wheaton’s stock has delivered over 200% in shareholder returns after adjusting for reinvested dividends, while the return on the Toronto Stock Exchange Index has been only 100% since June 2014.
Wheaton Precious Metals Corporation expects a 40% increase in production over the next five years. Analysts covering WPM stock project that by 2028, the company’s adjusted earnings will grow by 19% annually. Therefore, by the end of 2028, the company’s adjusted earnings should be $3.80 per share. If priced at 30 times forward earnings, the stock’s trading price in the next four years should be around $115, indicating a potential increase of over 50% compared to current levels.
Among the 10 analysts tracking WPM, 9 recommend “buy,” while 1 recommends “hold.” The average target price for WPM stock over 12 months is $84.82, representing a 16.5% increase from the current price.
