Countries around the world are experiencing high inflation rates, leading to recession concerns hitting the market. Such conditions tend to reduce portfolio returns, limiting the upside many may expect to see from long-term growth holdings. So, what can investors do to safeguard their holdings?
There are a few options available worth considering, for those concerned about inflation. One such investment has been gold over time.
With rising inflation, the price of gold keeps increasing in tandem, acting as a perfect hedge. Now, buying physical gold can come with several hassles. So, a smart way to get around such problems is to invest in gold royalties.
These are essentially contracts issued by companies to fund gold mining operations. In exchange for upfront payment, the mining organization provides ownership rights to a fixed percentage of gold production or revenue.
In the Canadian market, one such promising company is Franco-Nevada (TSX: FNV).
Here are some reasons why investors should give this stock a look.
Franco-Nevada has a diversified portfolio
Franco-Nevada is an organization that deals in gold royalty and streaming in Canada, the U.S., Latin America, and other parts of the world. It also engages in the mining of gold, silver and platinum, along with the sale of crude oil, natural gas, and natural gas liquids.
This diversified portfolio enables the company to efficiently manage risks, along with providing liquidity to investors.
Investors gain strong five-year return from Canadian mining company
Over the last five years, Franco-Nevada investors have gained superb returns. The total shareholder return in the aforementioned period was 138%, and the company’s earnings per share grew at an impressive compound annual growth rate of 25%.
Additionally, over the same period, FNV stock has risen 18% annually — an impressive move relative to the overall market.
Franco-Nevada Gains from rising metal prices
According to recent reports, Franco Nevada is among the companies benefiting most from rising precious metal prices. This is because due to economic uncertainty in the global market, the value of gold has grown to US$1,920/ounce, while silver has reached US$23/ounce.
Franco-Nevada is also expecting a higher number of gold and silver stream deliveries from its Cobre Panama, Antamina, and Candelaria mines. Furthermore, the company’s sustained focus on cost management will enable it to generate higher margins.
Experts predict that all these factors will contribute to the company’s financial growth in the upcoming quarters.
Bottom line
Given the increasing inflation rates and the need for an effective hedge, gold royalties can be the next big thing for investors. Franco-Nevada’s solid portfolio and appreciating metal prices have put this company on a solid growth trajectory. Based on all these factors, investors can consider adding this stock to their portfolios.
