Dividend Stocks

3 Stocks to Buy as Gold Touches $2,000 an Ounce

Last week, gold briefly traded above $2,000 an ounce. The precious metal is finally poised for a breakout rally after an extended period of sideways movement and consolidation. Considering the positive outlook, it might be a good time to look at some of the best gold stocks to buy.

Coming to the bull thesis for gold, geopolitical tensions are the key catalyst for the upside. It’s unsurprising that central banks have been on a buying spree. Further, with inflation likely to remain relatively stubborn, gold is a store of value. I must add that multiple rate cuts are likely in the second half of 2024. This is another impending catalyst for gold surging above $2,000 an ounce.

With these consideration factors, I would remain invested in fundamentally strong gold mining stocks. Besides the visibility for capital gains, gold stocks will likely reward investors with healthy dividend growth. Let’s discuss three gold stocks to buy and hold.

Newmont Corporation (NEM)

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Newmont Corporation (NYSE:NEM) stock has been in a downtrend with a correction of 26% for year-to-date. I, however believe that NEM stock is attractively valued, and I must add that a dividend yield of 4.22% is a positive.

An investment grade balance sheet is one of the key reasons to like Newmont. As of Q3 2023, the Company reported a liquidity buffer of $6.2 billion. Further, a net-debt-to-adjusted EBITDA of 0.7 provides high financial flexibility for organic and acquisition-driven growth.

It’s worth noting that for Q3 2023, Newmont reported revenue and adjusted EBITDA of $2.5 billion and $933 million, respectively. Assuming gold trades above $2,000 an ounce, Newmont will be positioned to deliver an annual EBITDA of $4.5 to $5 billion.

With robust cash flow visibility, there is a strong case for healthy dividend growth. Further, production is likely to accelerate in 2024 with the recent acquisition of Newcrest Mining (OTCMKTS:NCMGF). This also strengthens the case for strong dividend growth.

Kinross Gold (KGC)

An image of a rising bar graph on top of gold bars, representing gold stocks

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Among emerging gold miners, Kinross Gold (NYSE:KGC) stock is worth considering. In my view, if gold trades at $2,000 to $2,200 an ounce next year, KGC stock is likely to double. My view is underscored by the point that KGC stock trades at an attractive forward price-earnings ratio of 14. Further, the stock offers a dividend yield of 2.19%.

It’s worth noting that the Company had to sell Russian assets last year due to geopolitical reasons. Even with this asset sale, Kinross has guided for stable production through 2025.

I, however, believe that the Company can potentially acquire assets to boost production. As of Q2 2023, Kinross reported a liquidity buffer of $1.9 billion. Further, the annualized operating cash flow visibility is around $2 billion. This provides Kinross with high financial flexibility to pursue opportunistic acquisitions.

I must add that geopolitical tensions, macroeconomic uncertainties, and the possibility of rate cuts next year will support gold prices on the upside. This will support revenue and cash flow growth for Kinross.

Barrick Gold (GOLD)

An image of multiple gold bars. Gold prices

Source: Shutterstock

Barrick Gold (NYSE:GOLD) is another blue-chip gold mining stock worth holding in the portfolio. Besides trading at attractive valuations, GOLD stock offers a dividend yield of 2.54%. I expect high total returns in a scenario of gold trends higher next year.

For the first nine months of 2023, Barrick Gold reported EBITDA and operating cash flow of $4 billion and $2.7 billion, respectively. Even at the current gold price, the Company’s annual OCF outlook is $3.6 billion. This provides high financial flexibility for aggressive investments and dividend growth.

From an asset perspective, Barrick Gold reported proven and probable mineral reserves at 76 million ounces as of December 2022. On a year-on-year basis, net reserves increased by 6.7 million ounces. A solid reserve base and a robust replacement ratio ensure steady production and cash flow visibility. GOLD stock can, therefore, be a value creator if gold surges higher.

On the date of publication, Faisal Humayun 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.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.

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