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Tags: precious metals | gold and silver | inflation

3 Gold and Silver Stocks to Profit From Inflation

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Bob Ciura By Wednesday, 01 December 2021 09:50 AM EST Current | Bio | Archive

Precious metals prices could be headed higher, due to the rise of inflation over the course of 2021. Core inflation in the U.S. reached a 31-year high in October.

Inflation is generally a negative catalyst for stocks, but there are certain industries that stand to benefit from inflation. A prolonged period of sustained inflation could be a positive catalyst for many companies in the precious metals industry, such as gold stocks and silver stocks.

These 3 stocks in particular are appealing for investors interested in gaining exposure to the precious metals industry.

Precious Metals Stock: Royal Gold Inc. (RGLD)

Royal Gold Inc. is a precious metals royalty and streaming company. Its main focus is acquiring and managing precious metal stream and royalty interests. The company has global operations by generating revenue in North America and Chile.

Royal Gold has been one of the major beneficiaries of rising precious metals prices to-date. In the most recently reported quarter, Royal Gold achieved record revenue of $174.4 million. Operating cash flow of $129.9 million was a 38% increase from the prior-year period.

The company has promising growth catalysts moving forward, through organic expansion as well as external growth from acquisitions. For example, major projects include the Khoemacau Project which has begun producing copper silver concentrate. Royal Gold is also active in making acquisitions, such as the Red Chris Mine royalty and NX Gold Mine gold stream acquisitions in August.

Meanwhile, Royal Gold is a reliable dividend growth stock. The company has increased its dividend for 20 years in a row. Shares currently yield 1.4%.

Precious Metals Stock: Wheaton Precious Metals (WPM)

Wheaton Precious Metals is the world’s largest metal streaming company. Like Royal Gold, its business model is based on purchasing the right to buy silver and gold at a low fixed cost. It has agreements with 24 mines, and the company should generate revenue of $1.3 billion for 2021.

Wheaton has also been a big winner from inflationary trends to start the year. In the most recent quarter, Wheaton’s total revenue reached a new quarterly record at $330 million, up 33% from the same quarter last year.

Production volume increased 32% for the quarter, reaching 194,000 gold equivalent ounces. Meanwhile, silver production increased 84% to 6.72 million ounces. Pricing rose 24% year-over-year, reflecting the benefit of rising precious metals prices.

As its fundamentals have improved, the company has returned increasing amounts of cash to shareholders. Wheaton recently increased its dividend again, this time by 7%. This was the fourth consecutive quarterly dividend hike. Shares currently yield 1.4%.

Precious Metals Stock: Franco-Nevada Corp. (FNV)

Franco–Nevada Corporation is a royalty and stream company focused on gold and other precious metals, as well as oil and gas.

The company’s cash–flow producing portfolio is actively managed and aims to maintain over 80% of revenue from precious metals.

Gold Equivalent Ounces (GEOs) sold in the third quarter increased 9% compared to 3Q 2020. Revenue rose 13% year-over-year to $269.8 million. Adjusted net income grew 9% to $165.6 million, while the company generated $206.9 million in operating cash flow during the quarter.

Future growth is likely for the company, not just from higher precious metals prices, but also from expansion of precious metals production. GEOs sales growth and energy revenue growth are expected in 2021 and over the next several years. The existing portfolio is expected to produce roughly 645,000 GEOs by 2025.

Like Royal Gold and Wheaton, Franco-Nevada is a strong dividend growth company. FNV has raised its dividend for 14 consecutive years, placing it on the Dividend Achievers list. Shares currently yield 0.9%.

The Bottom Line

Inflation has reared its ugly head in the U.S. over the course of 2021. It is possible the current inflationary period will subside next year. But if inflation persists, investors might consider gold stocks and silver stocks as an inflationary hedge for their investment portfolios.

Royal Gold, Wheaton Precious Metals, and Franco-Nevada have promising growth catalysts ahead, and are all likely to be beneficiaries of a sustained rise in precious metals prices. And, all 3 pay dividends and raise their dividends each year, making them appealing for dividend growth investors as well.

Disclosure: The author has no positions in any stocks mentioned


Bob Ciura has worked at Sure Dividend since October 2016. He oversees all content for Sure Dividend and its partner sites. Bob received a Bachelor’s degree in Finance from DePaul University, and an MBA with a concentration in Investments from the University of Notre Dame.

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Precious metals prices could be headed higher, due to this year's rise inflation. Core inflation in the U.S. reached a 31-year high in October. While inflation is generally a negative catalyst for stocks, there are certain industries that stand to benefit.
precious metals, gold and silver, inflation
Wednesday, 01 December 2021 09:50 AM
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