Wheaton Precious Metals (TSX:WPM)(NYSE:WPM) is an interesting pick for investors seeking a precious metals investment with plenty of growth prospects but little of the risk associated with traditional miners. Here’s what makes Wheaton unique among miners and why this is the precious metals company that should be in your portfolio.
Wheaton’s advantage in volatile precious metals
One of the first questions you might be wondering about is, what makes Wheaton so unique over all of the other traditional miners on the market, many of which are impressive buys in their own right? To answer that, let’s talk a bit about Wheaton is, which isn’t a traditional miner.
Wheaton is a streamer, which basically means the company provides upfront capital to a traditional miner to come in and set up operations and begin mining. In exchange for that upfront injection, Wheaton is allotted a certain amount of metals produced by the mine that the company can purchase at a highly discounted price; after which, Wheaton can sell those discounted metals at the market rate.
It’s an interesting arrangement that removes Wheaton from much of the risk and day-to-day costs of operating a mine and allows it to pick up and move on to the next mine with ease.
A diversified portfolio
Not all investors may realize it, but Wheaton changed its name a few years ago, opting to drop the word Silver. This was done to highlight that Wheaton was more than a silver streamer, with the company increasingly pursuing streaming agreements to diversify itself by including other metals such as palladium, cobalt, and gold.
In the most recent quarter, Wheaton saw gold sales exceed 115,000 ounces — the most ever sold by Wheaton in a single quarter. From a production standpoint, Wheaton produced 93,585 ounces of gold in the quarter, reflecting a 22% increase over the same quarter last year, while also producing 4,729 ounces of palladium in the quarter — a metal that was not streamed last year.
Looking towards the remainder of the quarter, Wheaton is forecasting 365,000 ounces of gold, 24.5 million ounces of silver, and 22,000 ounces of palladium.
Here are two more reasons to consider Wheaton
In addition to operating at a lower risk than traditional miners and streaming multiple types of metals, there are two additional reasons to consider Wheaton.
The first comes in the form of the market itself. When the market moves closer to recession, jittery investors often move towards more defensive options such as utilities or precious metals. This only adds to the overall appeal of Wheaton, which is already seen as a lower-risk investment over its traditional miner peers.
The second reason is Wheaton’s dividend. While many miners often offer a token distribution, Wheaton’s quarterly payout currently works out to an impressive 1.66% yield. While I realize there are far better yields on the market for income-seeking investors, Wheaton’s dividend itself is composed of 30% of the average cast generated in the previous 12-month period, meaning that when Wheaton has a good quarter, shareholders will have a great return.
Given the volatility in the market at the moment and Wheaton’s strong forecast for the rest of the quarter, Wheaton could be the perfect defensive stock for your portfolio.
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Fool contributor Demetris Afxentiou has no position in any of the stocks mentioned. Wheaton Precious Metals is a recommendation of Stock Advisor Canada.