After rising 14.6% in 2023, gold prices continued to soar through the first half of 2024 as gold bugs drove the price of the yellow metal up another 12.2%. And some don't believe that the price will be ebbing anytime soon. J.P. Morgan, for example, forecasts the price of gold will average $2,500 per ounce in the fourth quarter of 2024.
But that's not to say you should start bulking up on bullion. Instead, investors should consider investments in dividend-paying gold companies that are industry leaders -- stocks like AgnicoEagleMines (NYSE: AEM), Franco-Nevada(NYSE: FNV), and Newmont(NYSE: NEM).
1. Agnico Eagle
Over its 67-year history, Agnico Eagle has emerged as one of the largest gold producers available to investors. Operating assets in Canada and Mexico as well as Finland and Australia, Agnico Eagle has grown considerably over the past 20 years thanks to organic growth as well as through acquisitions such as Kirkland Lake in 2022 and Canadian Malartic in 2023. In 2005, for example, Agnico Eagle produced 240,000 ounces of gold, and in 2024, the company projects gold production between 3.35 million ounces and 3.55 million ounces. And with 54 million gold ounces in proven and probable reserves, Agnico Eagle will likely enjoy ample gold production in the years to come.
One of the most alluring qualities of Agnico Eagle is its prodigious free-cash-flow production. In 2023, the company reported a record $947 million in free cash flow, or $1.91 per share. This more than covered the company's 2023 dividend of $1.60 per share, suggesting the company isn't imperiling its financial well-being to placate shareholders.
2. Franco-Nevada
A royalty and streaming company, Franco-Nevada provides an ideal gold investment opportunity for investors who are risk-averse. Instead of producing gold itself, Franco-Nevada acts more like a specialized financier, supplying mining companies with upfront capital to develop precious metals projects. In return, Franco-Nevada receives either a percentage of the mined mineral or the ability to buy the mined mineral for a preset price. Further illustrating the appeal of Franco-Nevada to those looking to minimize risk is the fact that the company currently doesn't have any debt.
While gold represents the main source of Franco-Nevada's revenue -- 63% in the first quarter of 2024 -- the company also has exposure to other minerals such as silver and platinum as well as oil and gas, making it a great option for those interested in gold, but who want to mitigate the risk of a price downturn.
3. Newmont
With a market capitalization of $53.7 billion, Newmont is the largest gold stock available to investors, forecasting 2024 gold production of 6.9 million ounces. Its portfolio of assets is located throughout the Americas as well as Africa and Australia, giving it a considerable global presence. Over the past year, the price of gold has soared 22% while Newmont stock has risen only 9%. In light of the strong correlation between movements in the price of gold and those of gold mining stocks, it's clear that the bears have been more active than bulls with regard to Newmont stock. The main reason for this is the company's decision in February to reduce its quarterly dividend from $0.40 per share to $0.25 per share as it strives to optimize its portfolio of precious metals assets.
Disappointing as this may be for some, the company still intends to repurchase $1 billion in stock over the next two years, and there's always the possibility that the company elects to raise its dividend after restructuring its portfolio. With shares valued at 9.8 times operating cash flow -- just under their five-year average cash-flow multiple of 9.9 -- now seems like a great time to pick up shares of this premier gold stock at a reasonable price.
The golden takeaway
For investors interested in bolstering their passive income, both Agnico Eagle and Newmont are on similar footing as both offer forward dividend yields of 2.2%. Those who are more conservative, however, may find Agnico Eagle more appealing considering the strong free cash flow it generates to cover the distribution. On the other hand, if the stocks' price tags are a deciding factor, Newmont may be more appealing as it offers a less expensive valuation. Those who are less interested in direct exposure to gold producing companies, on the other hand, would be well-suited to dig further into Franco-Nevada as a way to add some glitter to their holdings.
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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Scott Levine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy.
