Gold Royalty Companies Report A Solid First Quarter On Higher Metal Prices

I believe this is a huge contributor to why we’re seeing higher gold prices right now. The yellow metal has surged above $1,700 an ounce, or 34 percent above its per-ounce price a year ago.

Yes, gold doesn’t pay dividends or interest, but then neither do Treasury bonds right now. And with S&P 500 companies losing revenue, an estimated $37 billion in dividends could be cut or suspended this year. Royal Dutch Shell recently cut its dividend for the first time since World War II. Last week, Disney became the latest blue-chip to suspend its dividend, despite the runaway success of its new streaming platform, Disney+.

Meanwhile, gold royalty company Franco-Nevada raised its quarterly dividend 4 percent, from $0.25 per share to $0.26 per share, marking the 13th annual consecutive dividend increase.

Rising investor appetite for gold is reflected in the fact that assets under management (AUM) in global gold-backed ETFs reached a new record high in April, according to the World Gold Council (WGC) data. AUM stood at $184 billion as of April 30, with holdings also hitting a new all-time high of 3,355 metric tons. Assets in such ETFs grew in 11 of the 12 previous months, adding 80 percent to total AUM.      

(Click on image to enlarge)

AUM in gold-backed ETFs hit a new record high in April

 

Although demand for gold jewelry has been negatively impacted by the COVID-19 crisis, “history suggests that the likely strength of investment demand may offset this weakness,” the WGC writes in its April report.

Gold Royalty Companies Report $400 Million in Free Cash Flow

For more than a couple of months now, I’ve said that gold mining companies will have a strong first (and second) quarter thanks to higher metal prices. Stock prices, as you know, are largely driven by revenues and free cash flow (FCF).

FCF is what companies have in the bank after paying operating costs, taxes, and other expenses. The higher the cash flow, the better the company can expand its business and reward shareholders.

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Disclaimer: 

The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. A basis point, or bp, is a common unit of measure ...

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