Gold has long been the exact opposite of what value investors look for in an investment. Subsequently, gold stocks have been ignored by large parts of the value investing community.
However, some value investors do have macroeconomic concerns, and they would like U.S. dollar protection. David Einhorn owns SPDR Gold Trust (GLD, Financial) and value investor Mario Gabelli continues to load up on Newmont Mining (NEM, Financial).
Newmont Mining is one of the only gold companies that even a value investor could love.
Firstly, Newmont Mining generates $8 of cash flow per share and only sells for 7X cashflow. The P/E ratio is a miniscule 12x earnings.
Last week Newmont held an analyst day and made a couple of interesting announcements.
Firstly, Newmont said that it expected production to grow from 5 million to 7 million ounces over the course of the next five years. The second announcement was that Newmont would boost its dividend 20 cents for every $100 increase in the price of gold. The current yield is 60 cents or only 1%.
Given today's gold price at $1,470, that means Newmont will pay a divided of over a dollar. Consequently, the yield would jump to 1.8% putting Newmont on par with other value stocks such as Microsoft (MSFT).
However, if you believe that gold could rise to $2,000, the dividend story becomes more compelling, as the yield would jump to 3.6% on stock purchases made today. That yield would put in the same category as dividend darlings such Johnson and Johnson (JNJ).
With 93 million ounces of proven and probable reserves, a healthy balance sheet, a low P/E ratio and surging dividend yield, Newmont is an up-and-coming value investment.Also check out:
However, some value investors do have macroeconomic concerns, and they would like U.S. dollar protection. David Einhorn owns SPDR Gold Trust (GLD, Financial) and value investor Mario Gabelli continues to load up on Newmont Mining (NEM, Financial).
Newmont Mining is one of the only gold companies that even a value investor could love.
Firstly, Newmont Mining generates $8 of cash flow per share and only sells for 7X cashflow. The P/E ratio is a miniscule 12x earnings.
Last week Newmont held an analyst day and made a couple of interesting announcements.
Firstly, Newmont said that it expected production to grow from 5 million to 7 million ounces over the course of the next five years. The second announcement was that Newmont would boost its dividend 20 cents for every $100 increase in the price of gold. The current yield is 60 cents or only 1%.
Given today's gold price at $1,470, that means Newmont will pay a divided of over a dollar. Consequently, the yield would jump to 1.8% putting Newmont on par with other value stocks such as Microsoft (MSFT).
However, if you believe that gold could rise to $2,000, the dividend story becomes more compelling, as the yield would jump to 3.6% on stock purchases made today. That yield would put in the same category as dividend darlings such Johnson and Johnson (JNJ).
With 93 million ounces of proven and probable reserves, a healthy balance sheet, a low P/E ratio and surging dividend yield, Newmont is an up-and-coming value investment.Also check out:
