Investments in precious metals are not often thought of as income investments. This is mainly due to the unproductive nature of gold as an asset class. Gold production, however, is a productive process. Gold producers like Barrick Gold (TSX:ABX)(NYSE:GOLD), do have an interesting value proposition today.
In this article, I’m going to focus on the dividend upside of Barrick Gold, rather than the other clear tailwinds I most often comment on; these include rising gold prices and correspondingly widening profit margins and improving operating metrics.
Barrick’s dividend yield has traditionally been small, around 1% in the past. With its rising share price of late, I expect the company’s yield will stay low for the foreseeable future.
That said, during this company’s recent earnings release, Barrick’s management team announced a 14% hike to its dividend. This move comes as profit handily beat expectations. Analysts continue to be broadly bullish on this sector and Barrick specifically. Warren Buffett and other smart money managers are continuing to pile cash into this sector.
Like other gold producers that have recently raised their dividend multiple times this past year, I expect investors in Barrick could be rewarded by additional dividend hikes, should conditions continue to be favourable in this sector.
Dividend increases over time add up. While Barrick’s current yield may seem low, investors could see meaningful income over the long term, should these dividend hikes compound.
Invest wisely, my friends.
