Celebrating stocks with big exposure to the gold market is in vogue here at The Motley Fool. And why wouldn’t it be?
The yellow metal’s sitting pretty above the $1,500 per ounce marker, and there’s a confluence of factors that could send it to fresh multi-year tops in the weeks and months ahead. They include more trade-related bickering between US and Chinese lawmakers, fresh political chaos in Italy, extra rate cuts by central banks, further Brexit delays, and the possibility of a hard Brexit in late October…
Don’t get physical!
But gold isn’t just the flavour of the month for some of us. Financial market volatility isn’t anything new, so it’s a good idea to always hold the metal itself — or shares in producers of the safe-haven commodity — to protect yourself when challenging macroeconomic and geopolitical times like these develop.
And I suggest buying stock in one of those producers is a better bet than buying physical gold itself, or a related ETF. Sure, these businesses carry additional risk to investors through the usual mining-related problems (like underwhelming payloads, bad resource estimates and unexpected cost increases). But I’d argue that some of the staggering dividends some of these gold diggers offer makes them a much better bet than simply buying into the lifeless, non-yielding metal itself.
Take Caledonia Mining Corporation (LSE: CMCL), for example. This particular miner’s expected to keep the full-year dividend locked at 28 US cents per share and this means forward yields stand at a whisker below 5%.
The possibility of booming gold values in the near-term and beyond isn’t the only reason to buy Caledonia today, though.
Grade-related problems, allied with the usual power-related problems associated with mining in Zimbabwe, means that full-year production guidance for 2019 was downgraded in August.
But the long-term outlook for Calendonia looks extremely rosy following significant progress at its Blanket Mine over the summer, putting it on course to reach its 80,000 ounce production target by 2022 (up from an expected 50,000 to 53,000 ounces for this year).
The 5.1% dividend yield
I’d also happily buy Go-Ahead Group (LSE: GOG) for September, another big dividend payer whose share price could explode in September.
Full-year financials are slated for this week (Thursday the 5th) and, if its most recent update’s anything to go by, another share price surge could be on the cards. Investor interest in Go-Ahead exploded in June as it lifted profit expectations for its London and international bus divisions following strong trading. However, this isn’t the only reason to celebrate of late — passenger volumes and revenues continue to swell across all its bus operations as well as its Southeastern rail franchise.
The FTSE 250 firm’s a great buy today then, ahead of another possible price-boosting statement and its current forward dividend yield of 5.1%. And it’s a great one to hold for years to come as its international expansion programme clicks through the gears.
I’m confident that Go-Ahead, like Caledonia Mining, could make you and I a fortune over the long term.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.