Historically, gold has shown the ability to provide long-term investors with returns that exceed inflation, making it an ideal investment for October 2024. A simple way to invest in gold is by investing in high-quality mining stocks, including Canadian gold stocks such as Barrick Gold (TSX: ABX), Kinross Gold (TSX: K), and Franco-Nevada (TSX: FNV). Let’s explore why.
Barrick Gold has a market capitalization of CAD 47 billion and is involved in the exploration, development, production, and sale of gold and copper. Increased output and rising prices have resulted in a 9.8% year-over-year revenue growth for Barrick Gold over the past 12 months, reaching CAD 11.83 billion.
In the June fiscal quarter, Barrick Gold’s gold profit margin rose by 39%, while its copper profit margin more than doubled compared to the first fiscal quarter of 2024. Adjusted earnings grew by 68%.
Analysts expect the company’s adjusted earnings per share to expand from CAD 1.15 in 2023 to CAD 1.62 in 2024 and CAD 2.09 in 2025. With a price-to-earnings ratio of 13, and considering the expected earnings growth along with a 2% dividend yield, the stock appears quite cheap.
Analysts remain bullish on the stock, anticipating that it will rise over 20% in the next 12 months.
Kinross Gold has a market capitalization of CAD 16 billion and has provided a total shareholder return of nearly 260% over the past decade. If we take dividend reinvestment into account, the cumulative return rate approaches 300%. The expected price-to-earnings ratio for Kinross Gold is 15.3 times, which is considered reasonable.
In the June quarter, Kinross produced 535,338 ounces of gold, with a sales cost of CAD 1,029 per ounce and total sustaining costs of CAD 1,387 per ounce.
Kinross reported operating cash flow of USD 478 million for the second quarter, with free cash flow at USD 346 million. The gold mining company also paid a quarterly dividend of USD 0.04 per share to shareholders, which translates to a forward yield of 1.25%.
Franco-Nevada manages a diversified portfolio of investments in precious metals like gold and silver, as well as commodities such as oil, gas, and natural gas liquids. It is one of the largest royalty companies globally, with a market capitalization of USD 32 billion. The company’s light-asset model allows it to benefit from high profit margins and operational leverage.
With an attractive portfolio, Franco-Nevada’s current stock price is also 20% lower than the generally expected target price.
