Gold and other precious metals have always been one of the best investments to make in times of high inflation. The same remains today, as many individuals look into buying gold stocks in order to secure their financial assets against the uncertainty of the market.
If you’re one of those people, you might be interested in investing money in gold stocks that pay a dividend.
Why might that be a beneficial strategy, and what stocks should you consider for such an investment?
Stocks with Dividends
Before we talk in more detail about the best gold stocks with dividends, let’s briefly touch on why investing in such stocks can be beneficial in the first place.
As you may or may not know, dividends are payments companies make to their investors with the intention of sharing the profits with them. The amounts investors receive in dividends are determined by a company’s board of directors.
However, not all companies choose to pay dividends to their shareholders. Some entities take another route and reinvest profits back into the company.
What are the most considerable advantages of investing in companies, ETFs, and stocks that pay out dividends?
Passive Stream of Income
Dividends are viewed by many investors as a form of passive income that is tied to their stocks. This portfolio income can be spent on whatever investors deem appropriate, and it’s an additional profit that is made by the shareholders, making companies that pay out dividends an interesting choice for those investors, who wish to be rewarded on a regular basis, and, for example, use their dividends as additional retirement income.
Favorable Returns on Investment
Dividends typically rise with the stocks. This offers investors favorable returns on their investments.
Dividend Reinvestment
Many investors opt for reinvesting their dividends, taking advantage of compounding the returns. Stockholders have a chance to reinvest dividends, increasing their future dividends and ROI. It’s a solid strategy, especially for those who favor long-term investments.
A Telltale Sign For Investors
Some individuals prefer to invest in companies that pay out dividends, taking this as an additional piece of information about the financial standings of a company. Companies that choose to share their profits with their shareholders can be viewed as profitable and, therefore, safer to invest in.
Of course, that is only one factor, and it does not necessarily guarantee that stocks will be profitable or safe. It’s always necessary to do thorough research before investing in any company, dividends or not.
As shown above, there are certainly some substantial advantages to investing in stock with dividends. However, it’s always helpful to consider all the cons of various investments, including this type.
What disadvantages can you expect when investing in dividend stocks?
Investment Portfolio Risk Management
Stocks that offer dividends are usually contained in certain industries and sectors. These would be banks and finances, basic materials, and utilities, among others. It’s important to realize risks associated with structuring an investment portfolio around one niche or industry, even when an incentive such as dividends is present.
Changes in Dividend Policy
It’s also important to be aware of the fact that a company may change its capital allocation policy at any point, reducing the amount it pays out to its stock owners in dividends. Now, this doesn’t have to necessarily mean that a company is struggling or is incurring losses. But, the matter of fact is that companies are not legally required to pay out dividends, having a lot of freedom in structuring and changing their dividend policies.
Dividend Traps
Dividend traps are high-yield securities that bear a substantial risk of a dividend reduction. This is because yields are dependent on dividends and stock prices. Depending on the stock market fluctuations, companies may implement a strategy of lowering dividends to keep a larger portion of profits, reducing potential gains high-yield securities investors were hoping to obtain.
Investing in high-yield securities based on their potentially high dividends may come with risks and result in smaller dividend payments than was assumed, which is a fact worth taking into account when making these types of investments.
Best Dividend Paying Gold Stocks
Now that we have established the most important advantages and disadvantages of investing in stocks with dividends, let’s look at some of the best gold ETFs with dividends as well as some individual gold stocks that offer this benefit you could invest in in 2023.
VanEck Vectors Gold Miners ETF (GDX)
If you’re looking for an interesting gold ETF with dividends to add to your portfolio, The VanEck Vectors Gold Miners ETF (GDX) might be one of the best picks. This EFT was established in 2006 by Van Eck, and currently, it’s one of the most prominent gold ETFs in the world, offering net assets of $12.51 billion.
VanEck Vectors Gold Miners ETF is made out of 51 holdings, which include some of the largest gold and precious metals companies on the market, including Newmont Corp and Barrick Gold Corp. This product can be traded on NYSE Arca Exchange.
Their shareholder yield amounts to 1.52%, which is smaller than some of the other products we decided to include in this ranking. Dividends from this ETF are paid on a yearly basis, the last one being on December 19, 2022.
iShares MSCI Global Gold Miners ETF (RING)
Another gold dividend ETF on our list is iShares MSCI Global Gold Miners ETF (RING), with net assets amounting to $425.6 million. This ETF was launched by BlackRock in 2012, and its primary focus is companies involved in gold mining that operate in different world markets.
The top 10 holdings in this ETF are occupied by entities like Newmont Corp, Barrick Gold Corp, or Agnico Eagle Mines Ltd. The ETF consists of almost exclusively stocks and no bonds.
With a 2.03% shareholder yield, this product ranks in a good position among the most profitable dividend paying gold stocks. Their dividend payment schedule offers two payments per year, usually in June and December.
Barrick Gold (GOLD)
If you’re more interested in individual dividend gold stocks, a good starting place could be Barrick Gold (NYSE:GOLD) stock. The company operates in the mining industry, mainly focusing on gold and copper, operating in countries like Canada, Chile, and Papua New Guinea, among many others.
Barrick’s financial strength and profitability are rated by the experts as better than average, with Operating Margin equalling 24.64% and Return On Equity (ROE) – 0.36%.
Their shareholder yield is kept close to the industry average, reaching 2.52%. The company pays out dividends four times a year, in March, June, September, and December.
B2Gold Corp (BTG)
Among the best gold mining stocks that pay dividends, we will also find B2Gold Corp. This is another entity with a stable position on the market and profitability. Founded in 2007 in Canada, the company operates mines in several countries, including Namibia and the Philippines.
One of the biggest assets of this company is the fact that its stocks are relatively affordable. With $3 per stock, ROE of 8.95%, and ROA (Return On Assets) being 7.29%, B2Gold stocks are on the radar of many investors.
Shareholder yield for this stock equals 4.45%, making this one of the highest dividend gold stocks right now. Dividends from this stock are paid out every three months, with the last payment taking place on June 15, 2023.
Sprott Gold Miners ETF (SGDM)
Lastly, we want to talk about the Sprott Gold Miners ETF (SGDM), an ETF designed to mirror the Solactive Gold Miners Custom Factors Index TR. This ETF was launched in 2014 by Sprott, and currently, it holds 33 holdings.
Net assets for this investing product amount to $255.68 million, while the yield equals 1.31%. They operate on a yearly payout schedule. The last dividend payment took place on December 15, 2022.
Final Thoughts
Dividends can help investors acquire a regular stream of income and increase the profits from their investments. For this reason, gold mining stocks that pay dividends may be interesting products to include in one’s portfolio.
Still, investing solely based on dividends or their absence is not the best strategy. It’s crucial to have the bigger picture, always doing a thorough analysis of companies, stocks, and ETFs you wish to invest in.
Article Sources
At Gold IRA Blueprint, we dive deep into the world of gold IRAs, using trusted sources to back up our insights. Our sources range from official documents to expert interviews, ensuring our content is both accurate and reliable. We also draw on research from reputable publishers to give you the most comprehensive understanding possible. Check out our editorial policy to see how we maintain our high standards for accuracy and fairness. Also make sure to check out our Financial Review Process to have a better understanding of our process.
VanEck Gold Miners ETF (GDX) overview, Yahoo Finance, Accessed 8 August 2023.
iShares MSCI Global Gold Miners ETF (RING) overview, Yahoo Finance, Accessed 8 August 2023.
Barrick Gold Corpo stock overview, GuruFocus.com, Accessed 8 August 2023.
B2Gold Corp stock overview, GuruFocus.com, Accessed 8 August 2023.
Sprott Gold Miners ETF (SGDM) overview, Yahoo Finance, Accessed 8 August 2023.
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