One reason why many investors never invest in gold is because the sector is well known for not rewarding shareholders with dividends.
The attitude does make sense. Gold miners take on a lot of debt when they complete a project. And it’s hard to predict cash flow when the price of the commodity fluctuates so much.
A new type of gold company has emerged to help companies with these challenges. What these companies do is more financial in nature. They agree to buy a certain amount of a mine’s production at a very low price in exchange for supplying money up front.
The price paid per ounce is low enough that the royalty company is guaranteed to make something, while the producer only dedicates a small percentage of future production to fulfilling the agreement. It’s a true win-win scenario.
Canada’s largest streaming company is Franco Nevada Corp (TSX:FNV)(NYSE:FNV).
Franco Nevada has been able to get investors who aren’t normally attracted to gold because it’s more like a financial company with some gold exposure thrown in. And it pays a consistent dividend, further solidifying its unique standing to investors. The current yield is 1.3% and it has raised the payout each year for the past nine years.
Many investors think the yield will go higher, too. Recent quarterly revenue is up some 70% year over year as royalty streams start coming online. Earnings could also spike in 2017 if gold goes higher. And the company has begun to expand into the oil and gas sector, further fueling growth.
