Today, let’s talk about the best precious metals stocks to buy now. They are cheap on a price-to-earnings (P/E) basis, and most pay dividends with high dividend yields, making them worth holding for the long term.
The companies on this list are cheap since they are companies that produce solid earnings and have enough cash flow to pay dividends to their investors.
This is important since many gold and precious metals stocks are highly speculative. They might have potential upside with their gold or precious metals reserves. But it is one thing to own a reserve and another to actually have enough capital to produce the precious metals on a profitable basis.
That is why I focused in this list on profitable precious metals stocks, most of which pay a dividend and also have low price-to-earnings (P/E) multiples.
Let’s dive in and look at these stocks.
DRDGold Limited (DRD)
DRDGold Limited (NYSE:DRD) is a South African gold reclamation company that has a fairly predictable gold output. As a result, its cash flow is also reasonably stable, as well as its dividend.
As is very typical in the U.K. and in former Commonwealth stock markets, this South African company pays dividends just twice a year. This is what happens in the U.K., Australia, South Africa, India, and other former British commonwealth countries, except for Canada. In fact, their earnings come out only twice a year — with an “interim” report and dividend, and then a final report and dividend. Moreover, often the final fiscal month is June, not December.
Often the interim dividend is only about half of the final dividend. And each year the dividends will vary depending on the profitability of the company.
For example, DRDGold Limited has already paid out a 13.23-cent interim dividend in February. That means that DRD is soon to report its full-year earnings for the year ending July and then pay a final dividend in August or September.
Last year it paid out 26.49 cents for the final dividend.
So assuming the final dividend is only about 3% less, based on a recent report in Seeking Alpha, we can expect a final dividend of 25.70 cents. That makes the total dividend for the year at 38.93 cents.
So, at Monday’s closing price of $5.59, this gold company stock would have an attractive 6.964% dividend yield. That is very close to 7% — which is where it could end up, depending on the exact amount of the final dividend. This makes DRD stock one of the best precious metals stocks on this list.
Nexa Resources SA (NEXA)
Nexa Resources (NYSE:NEXA) is a South American mining company that produces zinc, through mining and smelting. In addition, it produces silver, gold, copper, cement, lead, sulfuric acid, sulfur dioxide, copper sulfate, and limestone deposits.
The problem is it pays a dividend once a year. That makes the stock volatile. Nevertheless, it looks like the next dividend, without any special or supplemental, is about 33 cents annually. That works out to a yield of 6.1% annually.
Investors have to be patient in this stock. The dividend payment comes out in February. In addition, the 33-cent dividend is sometimes supplemented by a special dividend — but you can’t count on it.
Nevertheless, the company’s earnings are growing and it’s likely the dividend for 2023 (covering 2022 earnings) will likely be very close to the 2022 dividend.
Glencore PLC (GLNCY)
Glencore PLC (OTCMKTS:GLNCY) is a large $68 billion market cap mining company that is involved in everything from refining and processing to storing, transporting, and marketing metals and minerals around the world. Analysts estimate it will make $2.96 per share in earnings per share (EPS) this year.
That puts GLNCY stock on very inexpensive value metrics. For example, at $10.08 per share on July 11, its forward P/E is just 3.4x. That is extremely cheap. It implies the market doesn’t believe earnings are sustainable.
Estimates for 2023 are $1.98 per share. This raises the multiple to 5.09x. But this is higher but still inexpensive.
Moreover, Glencore now pays two dividends per year, a semiannual and annual (not interim or final). The stock trades on the London Stock Exchange where this is common. The two dividend payments were 26 cents each, paid in U.S. dollars.
So assuming earnings stay level, which is not likely, the total 52-cent dividend per ADR (the ADR is two shares, so 26 cents per share) produces a 5% dividend yield. But the dividend will likely be lower along with earnings. To be conservative, expect one-third lower dividend payments, just as earnings are projected to be one-third lower. This also coincides with forecasts of a global recession. Therefore, the dividend would be 34.66 cents per share.
Moreover, much of this disappointment is already in the stock price. This is still very cheap and makes GLNCY one of the best precious metals stocks.
Barrick Gold Corp (GOLD)
Barrick Gold Corp (NYSE:GOLD) is a Canadian gold- and copper-producing company that has a very stable gold and other products revenue. Moreover, its earnings are reasonably stable, with the average of 21 analysts forecasting $1.12 for this year and $1.18 next year. That puts the GOLD stock, at just under $17, on a forward P/E metric of 15.2x for 2022 and 14.4x for 2023.
Moreover, the company pays quarterly dividends. They pay 10 cents per quarter, plus, since 2021, they have been paying a supplemental dividend. In 2022 the quarterly supplemental has also been 10 cents. Therefore, the annualized dividend is 80 cents per share if this continues — 40 cents in regular quarterly dividends, and 40 cents in supplemental.
Obviously, the supplemental dividends could be lower if earnings fall, but so far analysts don’t project lower production or lower gold prices.
As a result, the annual yield, at $17 per share, is 4.7% (i.e., 0.80/$17). This looks reasonably stable and makes GOLD stock one of the best precious metals stocks in the world.
AngloGold Ashanti Ltd (AU)
AngloGold (NYSE:AU) is a gold-producing company based in Johannesburg, South Africa, has major gold mines in Africa, the Americas, and Australia. This gold company has a lower valuation than Barrick Gold Corp.
Maybe it has to do with the quality of earnings. However, analysts project growing earnings. The average of six analysts is $1.67 for 2022 and $2.02 per share for 2023. That puts AU stock, at $14.64 on July 11, on a forward multiple of just 8.75x for 2022 and 7.25x for 2023.
Or maybe it is cheaper because pays dividends only twice a year, with a semiannual dividend of 14.84 cents in Feb. The company reports its earnings quarterly but only wants to pay out twice a year. So it’s hard to predict what their payout ratio will be. Based on the dividends paid last year and its earnings, the payout ratio seems to be about 14%, since it paid a semiannual 6-cent dividend and a final 14-cent dividend on earnings of $1.48.
Therefore, assuming a 14% payout for 2022, the total dividends at $1.67 is 23.4 cents. So, at today’s price of $14.64, the stock has a prospective yield of 1.6%. That is much lower than the Barrick dividend, but AU does not pay out as much of its earnings as GOLD does. That could also be a major reason why AU stock has a much lower valuation — roughly half the P/E multiple.
Royal Gold (RGLD)
If you want quarterly earnings reports and quarterly dividends, Royal Gold, Inc. (NASDAQ:RGLD) is the stock for you. That is because it is a U.S. company based in Denver and provides stable quarterly dividends. Their quarterly 35-cent dividend provides an annual dividend of $1.40 per share, for a 1.3% dividend yield.
However, the company only invests in royalty streams, not actually in gold and other precious metals and mining directly. But what does this matter, in the long run? Its economic growth will be directly tied to the prospects of precious metals and other commodities prices.
In fact, it can hedge against volatility. The point is that analysts now project $3.91 per share in earnings this year and $4.55 in EPS for 2023. However, this means the stock valuation is very high, at 27x for 2022, and 23.1x for 2022. So, for stability, the tradeoff is a higher valuation.
On the other hand, the next quarterly dividend at 35 cents to be declared at the end of August, will likely be the last at that price. The next dividend declaration after that will probably be higher. That could act as a catalyst for the stock.
On the date of publication, Mark Hake did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.