Cameco Stock: An Excellent Uranium Play With Both Growth and Dividends

With clean energy demand continuing to grow, this stock might be a great long-term investment at current levels.

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Stock market investing is best done with a long investment horizon in mind. The TSX boasts plenty of growth stocks with the potential to deliver high returns in the short term. Unfortunately, many high-growth stocks are also risky investments that might even out in the long run.

To build truly lasting wealth, investing in the stock of companies with strong underlying business and the potential to deliver solid returns for decades is better.

Looking beyond the winners in the stock markets today, successful investing is about capturing long-term growth to achieve financial freedom. Finding sectors of the market to invest in that offer this kind of growth can be crucial for your investment strategy. Fortunately, the TSX also offers equity securities that offer short- and long-term growth right now.

The growing demand for cleaner and greener energy is boosting demand for renewables and uranium. This is why we are looking at Cameco (TSX:CCO), a stock in pole position to deliver excellent returns in the short and long term due to its industry-leading position.

The shift to cleaner energy

Clean energy demand has been around for decades. However, recent years have seen an increasing focus on shifting away from traditional energy. Global warming and climate change are forcing governments worldwide to transition to cleaner alternatives to fossil fuels to meet energy demand.

Renewable energy is undoubtedly growing amid the shift. However, an already established clean alternative might see a more significant surge in demand: nuclear energy.

While people might have their reservations about nuclear energy, it is a cleaner and more sustainable way to generate energy than fossil fuels. When managed properly, its only by-product entering the atmosphere is water vapour. As such, countries are increasing their investments in nuclear power to meet their climate goals.

The result is a growing demand for uranium, putting companies that mine this material essential to nuclear power in the perfect position to enjoy significant growth.

Cameco

Cameco is a $30.34 billion market capitalization mining company headquartered in Saskatoon. As one of the world’s largest uranium producers, its industry-leading position gives it a significant advantage over other companies due to its economy of scale and substantial influence over the uranium market.

Uranium prices are increasing due to the growing demand for nuclear energy. With a lack of significant investments in new uranium mines over the last decades and supply chain disruptions, established producers like Cameco are benefitting from rising prices. Besides high commodity prices, Cameco enjoys greater profitability due to its low-cost operations.

Cameco operates some of the lowest-cost uranium mines worldwide, allowing it to remain profitable despite low prices. The company has also secured several long-term contracts at fixed rates that offer significant protection from short-term volatility while generating stable revenues.

Its manageable debt load will get even easier as interest rate cuts happen. Combined with substantial cash reserves, Cameco is well-positioned to weather any short-term market volatility while continuing to invest in growth opportunities.

Foolish takeaway

As of this writing, Cameco stock trades for $69.87 per share, up by 80.82% from its 52-week low. With governments worldwide increasing nuclear power capabilities and many more constructing new nuclear reactors, uranium fuel demand and prices will only increase in the coming years.

The advantageous position of Cameco stock as a leader in the uranium mining industry makes it an excellent long-term investment to consider despite the massive surge in share prices over the last year.

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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends Cameco. The Motley Fool has a disclosure policy.

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