Every gold bug in the world knows the name Yamana Gold Inc. (AUY) as a company that held great promise as a premier gold and silver mining company, notes growth and income expert Bryan Perry, editor of Dividend Investing Weekly.
While it has been a great trading stock, it has also been a poor investment. But the stock is now looking like the next move is going to be higher -- maybe way higher.
The company took on too much debt on the bet of a bull market in gold prices preceding 2012, only to see the demise of the stock when gold prices crashed to $1,100/oz. in late 2015. It was the quintessential inverted scenario that shuttered a number of junior miners.
Taking into account the latest set of Q4 financials, and given that the central banks are the biggest buyers of gold and will continue to be as long as they are printing unlimited amounts of fiat currencies around the world, I believe it is time to revisit this stock again.
Fourth-quarter gold and silver production were 221,595 ounces and 2.97 million ounces, respectively, in line with the plan. Gold equivalent ounce (GEO) production comprised 256,288.
Increased annual dividend by 25% to $0.05 per share, effective in the first quarter of 2020. The increase follows a 100% increase to the annual dividend in the third quarter of 2019 to $0.04 per share from $0.02.
The company’s primary objective is to maximize free cash flow, and 2019 was a particularly strong year in this regard. Full-year cash flow from operating activities increased 29% to $521.8 million, while net free cash flow rose 63% to $358.4 million from $219.8 million.
Technically, the stock is emerging from a high-volume flag formation where a “golden cross” is in the making. For traders and investors alike, this is a hallmark of when to take at least a partial position.
I like the work the stock has done around the $4 per share level and I believe the next move is likely to $6 per share, assuming gold prices stay in their current bull trend or just move laterally.
The stock is valued at less than one times book value, and I, for one, do think that gold prices will continue to trend higher in a world awash in rising debt and devalued currencies.
Against this backdrop, Yamana Gold just might be one of the more intriguing turnaround stories of 2020. No promises, but by this time next year, investors might be asking themselves: how on earth did I miss that trade?
