Should You Invest in Gold Dividend Stocks

Investing in Gold can be seen as a safe haven for many when confidence is low in the markets and in the economy. Gold value per ounce is a regular metric being shared globally through daily news alongside your country’s currency and oil prices. I am not an investor in gold as it doesn’t fit my dividend investing strategy but I am really curious about what motivates others to invest in gold. Leave a comment if you invest in gold – I love to hear about your strategy.

Regardless of your motivation to invest in gold, there are a number of ways to be exposed to gold; from buying gold bullion to investing in gold mining companies to investing in precious metal ETFs. In some cases, you can even have a dividend paying gold mining stocks :).

Invest in Gold Stocks

Barrick Gold

Barrick Gold TSE:ABXNYSE:ABX  is the largest gold producing company by market capitalization at $31B and as of today, it just happens to have a dropped in prices of over 7%. Interestingly enough, ABX has a dividend yield of 2.57%. I did not expect such a dividend yield and I have since added it to my screening list to look further. If you invest in ABX, you also end up diversifying into other resources such as copper, oil and gas.

Some key metrics on the company:

  • Price: $31.90
  • P/E: 6.95
  • Market Cap: $31.84B
  • Dividend Yield: 2.55%
  • EPS: $4.58
  • 52 Week Range: 31.18 – 55.36
At those rates, my screening strategy ranks Barrick Gold with a 5.13 value rating (out of 6). Only a handful companies rank higher at the moment. I paused for a second and I want to look further into the company considering the P/E is really low and it is trading at its 52 week lows. What’s going on is basically my question? Is it better than Teck Resources (TSE:TCK.B) which ranks slightly higher at 5.23.

Goldcorp

Goldcorp TSE:GNYSE:GG  is the next largest gold producing company by market capitalization on the TSE. It also offers a dividend with a yield of 1.54%. Both Barrick and Goldcorp are often mentioned on the Business News Channel (BNN) with different takes from analysts.

Some key metrics on the company:

  • Price: $35.38
  • P/E: 18.40
  • Market Cap: $28.66B
  • Dividend Yield: 1.54%
  • EPS: $1.92
  • 52 Week Range: 32.34 – 55.93
Goldcorp earns a value rating of 4.24 (of out 6). Such value is usually decent but since gold isn’t my thing, I just ignore it :)
Related: How To Use Stock Chase Effectively

Kinross Gold

Tough year for Kinross Gold TSE:K. From peaks of $20 down to 25 cents and back up to the $8 range. The roller coaster ride was enough for me to stop looking any further.

Some key metrics on the company:

  • Price: $8.25
  • P/E: negative
  • Market Cap: $9.40B
  • Dividend Yield: 1.92%
  • EPS: -$1.98
  • 52 Week Range: 0.25 – 8.33
I am not going to bother with tracking this company since it was a penny stock not long ago and penny stocks aren’t my thing either :)

Invest in Gold ETFs

Above is just a few of the gold producing companies out of many. Barrick and Goldcorp are really the two major companies I hear of and I prefer to stick with the big players.

If you are just getting started with gold, it might be easier to just get a gold ETF and buy a little bit of the many gold producers through an ETF. XGD from iShare tracks the S&P/TSX Global Gold Index Fund and contains 59 holdings. The index is down 26% from a year ago, down 3% from 5 years ago and up 105% from 10 years ago. The rule of 7 says you should double every 7 years with a 10% compound growth. Doubling your money in 10 years is not that bad but you obviously need to have a good stomach for the ride.

Invest in Gold Bullion

If you want to own gold as is, then the bullion is for you. Investing in gold bullion is similar to buying currency in a way. You buy it at a certain price and hold it until you want to sell. Gold prices fluctuate over time and it’s rated by the ounce. Have you tried to buy gold bullion yet?

Sector Classifications

Sector classification is driven by a set of standards across North America, stock market and indexes. There is a specific company classification referred to as NAICS (North American Industry Classification System) managing a set of classifications. Statistic Canada is also a partner with defining the NAICS with company counts for different classifications.

While the company classification is critical to understand the evolution of industries, it is by far too detailed to manage for investors and all companies can be grouped under a sector. The best visual tree I could find is under Wikipedia's Global Industry Classification Standard.

Sectors Industries
Basic Material Chemicals, Construction Materials, Containers & Packaging, Metals & Mining, Paper & Forest Products
Communication Services Diversified Telecommunication Services, Wireless Telecommunication Services
Consumer Cyclical Auto Components, Automobiles, Household Durables, Leisure Products, Textiles, Apparel & Luxury Goods, Hotels, Restaurants & Leisure, Diversified Consumer Services, Media, Distributors, Internet & Direct Marketing Retail, Multiline Retail, Specialty Retail
US Consumer Defensive Sector Food & Staples Retailing, Beverages, Food Products, Tobacco, Household Products, Personal Products
Canadian Energy Energy Equipment & Services, Oil, Gas & Consumable Fuels
Financial Services Banks, Thrifts & Mortgage Finance, Diversified Financial Services, Consumer Finance, Capital Markets, Mortgage Real Estate Investment Trusts (REITs), Insurance
US Healthcare Health Care Equipment & Supplies, Health Care Providers & Services, Health Care Technology, Biotechnology, Pharmaceuticals, Life Sciences Tools & Services
US Industrial Sector Aerospace & Defense, Building Products, Construction & Engineering, Electrical Equipment, Industrial Conglomerates, Machinery, Trading Companies & Distributors, Commercial Services & Supplies, Professional Services, Air Freight & Logistics, Airlines, Marine, Road & Rail, Transportation Infrastructure
Canadian Real Estate Equity Real Estate Investment Trusts (REITs), Real Estate Management & Development
US Technologies Internet Software & Services, IT Services, Software, Communications Equipment, Technology Hardware, Storage & Peripherals, Electronic Equipment, Instruments & Components, Semiconductors & Semiconductor Equipment
Utilities Electric Utilities, Gas Utilities, Multi-Utilities, Water Utilities, Independent Power and Renewable Electricity Producers

DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.

DISCLAIMER: Please note that this blog post represents my opinion and not an advice/recommendation. I am not a financial adviser, I am not qualified to give financial advice. Before you buy any stocks/funds consult with a qualified financial planner. Make your investment decisions at your own risk – see my full disclaimer for more details.
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