I’m hoping to have cash in my pocket to invest in the coming days. So today, I’m building a list of the best cheap FTSE 250 shares to add to my portfolio.
Here’s one of my favourites.
Going for gold
Investors have been piling into gold stocks in 2024 to capitalise on the booming precious metal price. African mining business Centamin (LSE:CEY), as a result, has risen an impressive 29% in the year to date.
Should you invest £1,000 in Centamin right now?
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Gold’s moved from record high to record high, reaching an all-time peak above $2,500 per ounce in recent weeks. Some analysts are tipping bullion prices to keep going too, as central banks begin cutting interest rates, and worries over conflicts in the Middle East and Eastern Europe mount.
All this means that the likes of Centamin could remain attractive stocks in the near term. However, we’d be wrong to think that getting exposure to gold is just a shrewd short-term play.
Firstly, as we can see above, the gold price has soared more than 500% in value over the past two decades. It has, for instance, increased far more sharply than UK consumer price inflation (CPI) and the average British house price.
It’s also historically been a good idea for investors to have exposure to gold to manage risk. Safe-haven assets like this tend to perform strongly during economic downturns, offsetting weakness elsewhere in a trader’s portfolio and therefore providing a smoother return over time.
Up 1,600%!
But what are the advantages of buying gold stocks like Centamin over physical metal, or a metal backed exchange-traded fund (ETF)?
After all, buying gold or a gold-tracking financial instrument protects investors from the perils of commodities mining.
Centamin could encounter problems at its Sukari or Doropo projects — at the exploration, mine development or production stages — that impact revenues and drive up costs.
However, if the mining stock performs well operationally, an investor has a chance to make better returns than by simply aiming to track the bullion price.
This is where Centamin’s really impressed. While the gold price has risen 525% since 2004, this FTSE 250 stock — which operates the gigantic Sukari mine in Egypt — has recorded a near-1,600% share price gain over that time.
All-round value
On top of this, investors can receive an income if they buy a dividend-paying mining stock. This can provide them with a positive return even if the gold price fails to rise or even drops.
Centamin’s been a reliable dividend payer since the early 2010s. And, pleasingly, City analysts expect the miner to raise dividends over the next two years, helped by the rising gold price and production increases at Sukari.
This means dividend yields for 2024 and 2025 stand at a healthy 3.7% and 4.8% respectively.
Despite its share price explosion, Centamin shares still look dirt cheap on paper. On top of those market-beating dividend yields, the commodities giant also trades on a price-to-earnings (P/E) ratio of 9.3 times.
All things considered, I think it’s an exceptional stock to consider buying right now.
