Despite the most recent inflation data indicating a potential easing, the likelihood of it reaching the Federal Reserve's 2% target in the near future remains slim. This prevailing inflationary scenario has led officials to retain the possibility of implementing further rate hikes.
Given the backdrop, investors could consider buying three fundamentally sound gold stocks B2Gold Corp. (BTG), Centamin plc (CELTF), and Dundee Precious Metals Inc. (DPMLF), to hedge against market volatility.
In July, the Consumer Price Index (CPI) experienced a year-over-year increase of 3.2%, while the core CPI maintained a 4.7% 12-month rate. Both indices demonstrated a 0.2% increase on a monthly basis.
Although inflation has significantly retreated from its peak levels of mid-2022, this moderation might not be substantial enough to prompt the Federal Reserve to reverse its hawkish stance on addressing inflation as it remains notably higher than the Fed’s desired 2% threshold.
In light of persisting inflation, investors often consider seeking refuge in stable investments like gold due to its hedging characteristics. Gold is known for its ability to retain its value and liquidity amid periods of uncertainty.
Considering the additional rate hikes on the horizon, investors could amplify their allocation to gold to safeguard against inflation, potentially resulting in an upward trajectory of its price.
To grasp gold's role as an investment hedge, consider its historical performance, notably in the 1970s when the United States faced significant inflation. Oil price surges and energy shortages drove average annual U.S. inflation to around 8.8% from 1973 to 1979. In those six years, gold gained popularity as a top inflation hedge, boasting an impressive 35% annual return.
Furthermore, despite gold prices slightly easing this month, gold's value has consistently followed an upward path throughout the year. In 2023, gold demonstrated growth in value, surpassing 5%. It is worth highlighting that earlier this year, the price of gold came remarkably close to reaching historic highs, exceeding $2,000 per ounce.
Moreover, UBS’ outlook for gold price remains optimistic, with expectations of gold reaching $2,100 per ounce by the end of the year and further advancing to $2,200 per ounce by March 2024.
Keeping all these factors in mind, let us delve deeper into the fundamentals of the featured stocks in detail:
B2Gold Corp. (BTG)
Headquartered in Vancouver, Canada, BTG operates as a gold producer with three operating mines in Mali, the Philippines, and Namibia. In addition, the company has a 25% interest in Calibre Mining Corp.; and approximately 19% interest in BeMetals Corp.
On June 27, BTG paid its shareholders a quarterly dividend of $0.04 per common share. The company’s annual dividend of $0.16 translates to a yield of 5.25% at the current price level, while its four-year average dividend yield is 2.79%. Also, its dividend payouts have grown at a CAGR of 62.2% over the past three years.
On April 19, BTG announced the acquisition of all outstanding common shares of Sabina Gold & Silver Corp. This strategic acquisition grants BTG the ownership of Sabina's Back River Gold District, situated in Nunavut, Canada.
With the completion of the Sabina acquisition and the attainment of the Back River Gold District, BTG achieves a significant landmark in its mission to establish an economically viable and socially conscious senior gold mining enterprise. The company aims to incorporate a top-tier, high-quality gold project with abundant-grade reserves into its global portfolio.
For the fiscal second quarter that ended June 30, 2023, BTG’s gold revenue increased 23.3% year-over-year to $470.85 million, while its gross profit grew 61.4% from the year-ago value to $190.32 million.
The company’s adjusted net income and EPS rose 89.6% and 75% year-over-year to $85.80 million and $0.07, respectively. In addition, its operating income improved 62.7% from the year-ago value to $159.14 million.
The consensus revenue estimate of $478.61 million for the third quarter (ending September 30, 2023) reflects a 21.9% year-over-year improvement. The consensus EPS estimate of $0.07 for the current quarter indicates a 145.3% rise year-over-year.
BTG’s revenue has grown at a CAGR of 10.1% and 17.3% over the past three and five years, respectively. Likewise, its total assets have improved at a CAGR of 14.9% over the past three years.
The stock has gained marginally intraday to close the last trading session at $3.06.
BTG’s POWR Ratings reflect this robust outlook. The stock has an overall A rating, translating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Growth, Value, and Quality. In the 39-stock Miners – Gold industry, it is ranked #3. Click here to see BTG’s ratings for Momentum, Stability, and Sentiment.
Centamin plc (CELTF)
Headquartered in Saint Helier, Jersey, CELTF engages in the exploration, mining, and development of precious metals in Egypt, Burkina Faso, Côte d’Ivoire, Jersey, the United Kingdom, and Australia. It explores gold deposits, and its principal asset is the Sukari Gold Mine project, which covers an area of approximately 160 square kilometers located in the Eastern Desert of Egypt.
On July 26, CELTF declared an interim dividend of $0.02 per share, payable to its shareholders on September 29, 2023. The company’s annual dividend of $0.04 translates to a yield of 3.49% at the current price level, while its four-year average dividend yield is 5.78%.
During the six-month period that ended June 30, 2023, CELTF’s revenue increased 11.5% year-over-year to $425.61 million. Its gross profit grew 26.9% from the year-ago value to $157.81 million.
The company’s attributable profit for the period after tax and EPS amounted to $90.97 million and $7.73, up 7.4% and 6.2% year-over-year, respectively. Also, its adjusted EBITDA rose 25.9% from the year-ago value to $192.93 million.
Moreover, for the fiscal year 2023 (ending December 31, 2023), CELTF’s revenue is projected to increase 11.9% year-over-year to $881.96. Additionally, its revenue has grown at a CAGR of 4.1% over the past five years, while its total assets have improved at a CAGR of 3% over the past three years.
Over the past month, the stock has gained 9.3% to close the last trading session at $1.18.
CELTF’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It has a B grade for Value, Stability, and Quality. Within the same industry, it is ranked #5. Click here to see the other ratings of CELTF for Growth, Momentum, and Sentiment.
Dundee Precious Metals Inc. (DPMLF)
Based in Toronto, Canada, DPMLF is a gold mining company that engages in acquiring mineral properties; and exploring, developing, mining, and processing precious metals. It owns and operates a gold, copper, and silver mine located east of Sofia, Bulgaria, and a gold mine in southeastern Bulgaria.
On August 1, DPMLF declared a quarterly dividend of $0.04 per common share, payable to its shareholders on October 16, 2023.
The company’s annual dividend of $0.16 translates to a yield of 2.52% at the current price level, while its four-year average dividend yield is 1.54%. Additionally, its dividend payouts have grown at a CAGR of 58.7% over the past three years.
DPMLF’s total revenue for the second quarter (ended June 30, 2023) increased 24.6% year-over-year to $167.52 million, while its adjusted EBITDA came in at $86.65 million, up 26.2% from the year-ago value.
The company’s adjusted net earnings and adjusted EPS grew 86.9% and 94.1% year-over-year to $62.20 million and $0.33, respectively. Furthermore, its free cash flow rose 70.9% from the prior-year quarter to $70.45 million.
Analysts expect DPMLF’s revenue for the third quarter (ending September 30, 2023) to increase 33.1% year-over-year to $171.20 million, while the company’s revenue for the fiscal year 2023 (ending December 31, 2023) is projected to increase 17.4% year-over-year to $668.78 million.
Over the past three years, DPMLF’s revenue and net income have grown at CAGRs of 5.1% and 115.7%, respectively. Likewise, its EPS grew at a CAGR of 118.3% over the same period.
DPMLF’s shares have gained 32.8% year-to-date to close the last trading session at $6.33
It’s no surprise that DPMLF has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. It has an A grade for Stability and Quality and a B for Growth and Value. Out of 39 stocks in the same industry, it is ranked #2.
In addition to the POWR Ratings we’ve stated above, we also have DPMLF’s ratings for Momentum and Sentiment. Get all DPMLF ratings here.
What To Do Next?
Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:
BTG shares were trading at $3.10 per share on Friday afternoon, up $0.04 (+1.31%). Year-to-date, BTG has declined -11.19%, versus a 17.31% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Mukherjee
Anushka's ultimate aim is to equip investors with essential knowledge that empowers them to make well-informed investment choices and attain sustained financial prosperity in the long run.
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