Polymetal International (LSE: POLY) is a share which has really put the broader FTSE 100 in the shade over the past year.
While Britain’s premier share index has fallen 4% from 12 months ago, this particular blue-chip trades at £11.60 per share versus 639p a year ago, representing a whopping 81% advance. And I reckon the Footsie star has what it takes to keep surging in the near term and beyond.
Gold prices get better and better
The gold digger’s ascent of the past year has been built on two critical factors, the first of which is a soaring gold price. Values of the yellow metal have boomed 27% in the past 12 months on a mix of savage interest rate cutting by central banks; fears over US-led trade wars; concerns over the Brexit process; and a series of worsening economic datasets from key regions.
And twin developments this week have dumped a gallon of rocket fuel into the gold price outlook. The launch of impeachment proceedings against President Donald Trump is driving demand for safe-haven assets today — gold is up at $1,530 per ounce as I type — and is likely to provide significant support in the months ahead as the investigation rolls on.
Meanwhile, the slow-motion political car crash in the UK also promises to keep gold well bought into 2020. On Tuesday, the Supreme Court ruled that Prime Minister Johnson’s suspension of Parliament was illegal, a development that threatens to drag the Brexit saga out for even longer and possibly claim yet another Downing Street scalp before the year is out.
Throw the possibility of war between the US and Iran into the bargain too and it would seem to be open season for gold buyers. No wonder many analysts are tipping the metal to barge to new record tops and through the all-time high of around $1,908 per ounce recorded back in 2011.
Dividends AND growth
I said that Polymetal’s recent ascent has been built on two pillars and now I’d like to talk about the second major driver: news of soaring production levels.
The business — which operates a dozen or so mining assets across Russia and Kazakhstan — dug 756,000 gold equivalent (GE) ounces out of the ground in the first half of 2018, up 22% year-on-year. The result pushed group revenues 20% higher and investors can expect much more to come. The firm is on track to produce 1.55m GE ounces in 2019 and plans to extract 1.6m ounces in 2020 alone.
It’s no wonder that City analysts are predicting that Polymetal’s profits will surge 16% in 2019 and 19% next year, figures that lead to predictions of more dividend growth as well. Thus stock pickers can currently grab chunky yields of 4.1% and 4.7% for this year and next.
What’s more, these bubbly earnings forecasts leaves the Footsie firm dealing on a forward P/E ratio of 12.6 times, well below the broader FTSE 100 average of 14.5 times. I believe that Polymetal has all the tools to make its shareholders splendid returns in the years ahead and that, at current prices, it sits as one of the best bargains on the UK’s top index.
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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.