Gold has witnessed a healthy rally of 17% for year-to-date. After trading at recent highs of $2,482 an ounce, there has been some correction in the precious metal. However, I believe that gold is likely to remain in an uptrend. It’s therefore a good time to consider exposure to gold stocks for robust returns.
A key reason to be bullish on gold is the likelihood of multiple rate cuts in the next 18 months. Expansionary policies are negative for the dollar and positive for precious metals. Citi analysts see gold trading near $3,000 an ounce in the next 6 to 18 months.
If this scenario holds true, investors can expect some of the best gold stocks to go ballistic. With higher realized gold prices, free cash flows will swell for gold miners and translate into higher dividends coupled with increased financial flexibility.
Let’s talk about three gold stocks to buy that can surge by 50% before the end of 2025.
Newmont Corporation (NEM)
Newmont Corporation (NYSE:NEM) stock has trended higher by 14% for year-to-date. The gold miner however looks attractive at a forward P/E of 16.4 and offers a dividend yield of 2.13%. As gold trends higher, Newmont is positioned to deliver healthy growth coupled with robust free cash flows.
As an overview, Newmont has 128 million ounces in gold reserves and 155 million ounces of resources. With a leading portfolio of tier one assets globally, the miner is positioned to deliver steady production growth beyond the decade.
Last year, Newmont reported operating cash flow of $2.8 billion. With gold trending higher, it’s likely that OCF will be more than $4 billion for 2024. Further, if Citi’s estimates of gold at $3,000 an ounce hold true, annual OCF can be more than $5 billion. This will position Newmont for healthy dividend growth coupled with flexibility for aggressive capital investments. With NEM stock due for re-rating, the upside potential is significant from current levels.
Barrick Gold (GOLD)
Barrick Gold (NYSE:GOLD) stock has been an underperformer with year-to-date returns of 2%. I however believe that a breakout on the upside is impending with the gold miner delivering strong numbers. Besides the potential for capital gains, GOLD stock also offers an attractive dividend yield of 2.18%.
Barrick recently reported preliminary Q2 production of 948,000 ounces of gold and 43,000 tonnes of copper. The company is on track to progressively increase gold and copper production each quarter and is on-track to meet the full year guidance.
From a long-term perspective, Barrick expects steady increase in gold production between 2024 and 2027. Further, copper production is expected to double by 2029. If this is associated with higher realized prices, Barrick is positioned for healthy revenue, EBITDA, and cash flow upside.
Another point to note is that Barrick expects continued decline in all-in-sustaining-cost (AISC) between 2024 and 2026. This is another reason to expect EBITDA margin expansion and cash flow upside. With Barrick already having an investment grade balance sheet, there is ample flexibility for dividend growth and value creation through share repurchase.
Kinross Gold (KGC)
It’s worth noting that Kinross Gold (NYSE:KGC) stock has surged by 45% for year-to-date. I however remain bullish on the stock with valuations remaining attractive. Further, KGC stock offers a healthy dividend yield of 15.4.
One concern for Kinross is the point that the company expects stable gold production in the next 24 to 36 months. However, this is likely to be offset by the fact that higher realized gold prices will translate into revenue and cash flow growth.
The positive point to note is that Kinross has an investment grade balance sheet. The miner ended Q1 2024 with a liquidity buffer of $2 billion. Additionally, If gold trades in the range of $2,500 to $3,000 an ounce, Kinross is likely to report operating cash flow of more than $2 billion. With high financial flexibility, Kinross is likely to pursue acquisition of assets to boost production growth. That’s one factor that’s likely to translate into stock re-rating. I also expect healthy dividend growth over the next 24 months.
On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.