Wednesday, January 13, 2016

Is It Time to Buy Gold Stocks?

With the stock market tanking as it has since the beginning of this new year, investors are becoming scared. And when they are scared, they turn to a couple of areas. One is cash, and another is gold and other precious metals.

As a matter of fact, in the last thirty days, gold has increased by 2.14% and silver has jumped by 3.51%. Compare that to the S&P 500, which has dropped over 5% during that time frame.

So if investors want a gold play, they can either buy the metal, or they can invest in the gold mining companies. The advantage of the gold stocks over the metal are:
1. Dividend income from some companies
2. No storage fees
3. No worries about the stock being lost or stolen

If you want to buy gold stocks, you are better off going with the ones that do pay dividends. You get your capital returned faster, and can provide some stability to the shares. In addition, I always prefer companies that are debt free or have very little debt.

For example, DRDGOLD (DRD) is a South African miner which produces gold from surface tailings. The stock trades at 22.5 times earnings and pays a yield of 3.9%. However, the dividend is only paid annually. The company has $19 million in cash, and $2.6 million in debt.

If you are looking for a stock that pays a dividend more often, take a look at Gold Resource (GORO), which is a Colorado based company which owns gold and silver mines in Mexico. The stock has a trailing price to earnings ratio of 8 and a forward PE of 5. It has $14 million in cash and $1.2 million in debt. The yield is 1.5%, and investors have the advantage of dividends paid monthly.

For a free list of over 15 gold and silver mining stocks, go to Hopefully, some income producing gold mining stocks can provide some luster to your portfolio.

Disclosure: Author didn't own any of the above at the time the article was written.


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