Forget Gold Bars! Buy These 2 Gold Stocks Instead

You can gain exposure to gold through the Yamana stock and Wesdome stock. These companies are among the top gold producers in North America and Latin America.

| More on:
Gold bars

Image source: Getty Images

Wealthy people buy gold for protection against currency devaluation, inflation, or a severe breakdown of the financial markets. When you purchase physical gold, your interest is in the value of the metal.

For regular or retail investors, the next best thing to owning gold is investing in gold mining companies like Yamana (TSX:YRI)(NYSE:AUY) and Wesdome (TSX:WDO). The former is one of TSX’s popular gold stocks, while the latter is the gold producer in the Eagle River Mine.

There are several reasons to own gold. Bullion or coins give owners a sense of security. At the turn of the millennium, gold has become a trendy investment. It has large liquidating spreads, but you have to pay premium prices and fees to buy it.

Selling physical gold is a problem, because it entails shipping the shiny metal, whereas you can quickly sell your gold stocks and receive payment instantly. But it all boils down to cost. The price of a 400 oz. of gold is about US$610,000. You can purchase gold stocks at less than $10 per share.

Financial flexibility

Yamana is a $4.5 billion company that is into the operation of mines, development-stage projects, and exploration of mineral properties. Most of its sites are in Canada, Argentina, Brazil, and Chile. The company sells precious metals, including gold, silver, and copper.

The principal mining properties are the Canadian Malartic mine, the Cerro Moro mine in Argentina, the Chapada and Jacobina mines in Brazil, and the El Peñón and Minera Florida mines in Chile.

Last week, Yamana reported its third-quarter operating and financial results. The free cash flow of the company almost doubled to $100 million, along with the retirement of $800 million of debt. With the decision to intensify exploration activities, Yamana was able to produce 209,923 ounces of gold.

As of September 2019, the total company fund was $850 million, comprising of $100 million cash and $750 million available credit lines. The stock gain so far this year is 49.37%. At $4.77 per share and a dividend of 1.19%, Yamana is an excellent buy.

Top performer

Wesdome is one of the top-performing gold stocks in 2019. The stock is up 56.65% year to date, and analysts covering the stock are forecasting a climb from $6.94 to $9, or upside of 29.7%, in the next 12 months.

This $952.17 million company does a lot of things involving gold. It explores, extracts, processes, produces, reclaims, and sells gold in Canada. Most of the end products are gold doré bars with silver as a by-product.

The Eagle River Mine is the principal asset of Wesdome. It has three contiguous mining leases and about 442 contiguous active mining claims. The total area of coverage is 7,958 hectares. The Mishi Mine consists of 19 patented mining claims, five mining leases, and five staked claims with a total area of 3,055 hectares.

In Q3 2019, Wesdome’s gold production increased by 23%. For the full year, the company raised its production guidance to a range of 88,000 to 93,000 ounces of gold.

All that glitters is a gold stock

If you want exposure to the precious metal or gold, Yamana and Wesdome are your golden opportunities. You might not have the money to buy physical gold, but you can own shares of the companies that produce gold.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned.

More on Dividend Stocks

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

edit Woman in skates works on laptop
Dividend Stocks

3 No-Brainer Stocks to Buy Under $30

These three stocks all offer a huge deal for investors looking for dividends, as well as growth that will last.

Read more »

You Should Know This
Dividend Stocks

How to Convert a $300 Monthly Investment Into $338 in Monthly Income

If you want a certain amount in monthly passive income, invest a similar amount today and leave the rest to…

Read more »

Increasing yield
Dividend Stocks

3 Income Stocks With Big Yields to Consider in April 2024

If you haven’t yet made your March investments, here are three income stocks to buy the dip and lock in…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »

Young woman sat at laptop by a window
Dividend Stocks

3 Dividend Stocks Everyone Should Own for the Long Haul

For investors looking for top-tier dividend stocks to buy and hold for the long term, here are three of my…

Read more »