My best gold stock to buy in November
With the fall foliage offering golden hues, many of us no doubt crave hot cups of cinnamon apple cider. Less appetizing, however, are widespread political uncertainty and fears of another stock market crash, leaving many investors to look to gold stocks as a way to mitigate risk.
But who exactly to turn to? The opportunities for investing in the yellow metal are varied and can seem overwhelming to those unfamiliar with the gold market. Fortunately, the answer is simple. No, this is not to start pawning less desirable jewelry. Instead, investors can simply turn to one of the more alluring options in the industry: Kirkland Lake (NYSE: KL).
A brilliant record
Over the past two quarters, many businesses have faced restrictions on their operations due to COVID-19 – restrictions that have led companies to eat away at cash. But that was not the case with Kirkland Lake; in fact, the company’s financial well-being has improved.
Although Kirkland Lake will officially release its third quarter results on November 5, the company provided a hint of what investors can expect when reporting the results a few weeks ago in a third quarter update. . According to the preview, Kirkland Lake had increased its cash flow by 58%, quarter over quarter, to $ 848 million. In addition to revenue from the sale of 332,000 ounces of gold during the quarter, management attributed the growth in its position to the sale of its 32.6 million Osisko Mine shares, which represented 109 million euros. dollars, and $ 75 million she collected from Newmont mining linked to a newly forged strategic alliance.
Another nugget to note about the company’s balance sheet is that it has no debt. Before the onset of COVID-19, mining companies often relied heavily on debt to fund their growth projects, so for Kirkland Lake having zero debt now is a particularly noteworthy point.
Continued interest in rewarding shareholders
Granted, gold stocks aren’t leading the pack in terms of better options among dividend investors, but Kirkland Lake’s attention to its dividend is a good reason to give this stock some attention. After all, there are many gold stocks that don’t pay dividends.
In the third quarter update, Kirkland Lake announced a 50% increase in its quarterly dividend to $ 0.1875 per share. Beginning with the fourth quarter payout, the increased stock dividend results offer investors a forward dividend yield of approximately 1.64%. This recent increase isn’t the only attention the dividend has received from management this year. In the first quarter, for example, management doubled the quarterly dividend to $ 0.125 per share. With the company’s generous dividend increases, skeptical investors may wonder if the company is jeopardizing its financial health to satisfy shareholders. Since the company has never taken this route before, it is unlikely to start now. Over the past three years, Kirkland Lake’s annual payout ratio has averaged 5.6%, according to The morning star.
Focus on the future
While strong gold production is essential for a precious metals mining company like Kirkland Lake, it is also essential that the company replenish its depleted gold reserves, ensuring that its future remains bright. Although the company has not officially updated its mineral reserves, it acknowledged the encouraging results of its exploration program – results which could point to an increase in its mineral reserves in the future.
First, Kirkland Lake reported successful exploration at Detour Lake, an asset the company acquired earlier this year. In the third quarter update, Tony Makuch, President and CEO of Kirkland Lake, said the company “is achieving very encouraging exploration results at the start of our drilling programs at Detour Lake, which confirms our view that we can generate substantial growth in mineral reserves, which in turn will lead to higher production levels and improved unit costs in the future. “
In addition, the company has had success in Fosterville, located in Australia. In addition to finding higher than expected gold grades in the Swan zone, the company also “confirmed the substantial extent of the mineralized systems at Cygnet, Robbin’s Hill and Harrier” in areas beyond mineral reserves and known mineral resources. – a favorable opportunity which can contribute to future gold production.
You want a stake in Kirkland Lake
While the price of gold has climbed around 22% in 2020, Kirkland Lake shares remain attractively priced. Trading at 10.6 times operating cash flow, Kirkland Lake stock is nominally above its five-year average cash flow multiple of 10.3 and that’s a good deal compared to its ratio of 10.7 in 2019. For gold-hungry investors, Kirkland Lake is a perfect way to make their portfolios shine, and it will be especially interesting to see what the company reports on November 5.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.