The Motley Fool

Go for gold? I think this 5%+ dividend yield is too cheap to miss

Thinking of getting exposure to gold, but fearing that you might have missed the boat? Don’t fret is my advice. Buying of the metal and of bullion-backed financial instruments has continued to detonate. And there’s ample reason to expect sales of such assets to carry on rising. So I believe that buying shares in gold digger Centamin (LSE: CEY) could be a good idea today.

Data just released from the World Gold Council illustrates the strength of investor interest. Total holdings in global gold-backed ETFs rose by 61 tonnes in January, it said, with strong demand in Europe and North America offsetting a marginal fall in Asian buying interest. Consequently, aggregated holdings soared to fresh record peaks of 2,947 tonnes.

Claim your FREE copy of The Motley Fool’s Bear Market Survival Guide.

Global stock markets may be reeling from the coronavirus, but you don’t have to face this down market alone. Help yourself to a FREE copy of The Motley Fool’s Bear Market Survival Guide and discover the five steps you can take right now to try and bolster your portfolio… including how you can aim to turn today’s market uncertainty to your advantage. Click here to claim your FREE copy now!

Plenty of fuel

Rallying stock markets since then suggest that intense fears over the emergence of the coronavirus last month have largely subsided. However, the full implications of the outbreak are yet to be gauged and the virus continues to spread at an alarming rate.

And from an economic perspective, the tragedy threatens to deal huge damage. It’s possibly why China has just slashed tariffs on 1,717 US-made goods, a move to support the economy in these troubled times.

As I have said before, there are a number of other geopolitical and macroeconomic issues (like Brexit and China-US trade wars) that could drive demand for safe haven assets like gold in 2020 and beyond, even though gold’s price has been lower lately.

Record gold around the corner?

Centamin is one bullion producer that has fallen in value in February along with gold. It just closed at three-week lows below 130p per share following the metal’s drop towards $1,550 per ounce. I don’t expect this weakness to hold for long given the issues discussed above and the likelihood of more rapid central bank rate-cutting across the globe.

There’s certainly no shortage of experts who believe that gold values will keep rising in 2020. Take those recently participating in the London Bullion Market Association’s respected annual precious metals forecast survey. These analysts expect the yellow metal to average $1,558 per ounce this year, up 12% from 2019’s levels. And one respondent even expects gold to stride to new record highs above $2,000.

Growth, dividends and value

Most precious metals analysts might not be as bullish as Ross Norman of bullion dealer Sharps Pixley. But they agree that the price outlook is pretty compelling. And thus they expect earnings at Centamin to barge 55% higher in 2020.

This strong projection also makes the mining giant look pretty attractive from a value perspective. Its forward price-to-earnings growth (or PEG) ratio sits at just 0.3, well inside the accepted bargain benchmark of 1. Meanwhile, income chasers can celebrate broker expectations of more dividend growth this year, resulting in a meaty 5.2% yield. Centamin, in my opinion, is one terrific all-rounder that’s worthy of serious attention at current prices.

The high-calibre small-cap stock flying under the City’s radar

Adventurous investors like you won’t want to miss out on what could be a truly astonishing opportunity…

You see, over the past three years, this AIM-listed company has been quietly powering ahead… rewarding its shareholders with generous share price growth thanks to a carefully orchestrated ‘buy and build’ strategy.

And with a first-class management team at the helm, a proven, well-executed business model, plus market-leading positions in high-margin, niche products… our analysts believe there’s still plenty more potential growth in the pipeline.

Here’s your chance to discover exactly what has got our Motley Fool UK investment team all hot-under-the-collar about this tiny £350+ million enterprise… inside a specially prepared free investment report.

But here’s the really exciting part… right now, we believe many UK investors have quite simply never heard of this company before!

Click here to claim your copy of this special investment report — and we’ll tell you the name of this Top Small-Cap Stock… free of charge!

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.