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Franco-Nevada: Skousen's Only Buy in Gold
10/06/2017 6:00 pm EST
Franco-Nevada Corp. (FNV) is the only stock I recommend for the long term in the precious metals field. Unlike most mining companies, it has a good upward trend, notes Mark Skousen, editor of Forecasts & Strategies.
For the past 10 years, Barrick Gold has lost money but Franco-Nevada has been a five-bagger. That’s because Franco-Nevada has a very different business model than the mining companies.
It doesn’t mine gold, but rather finances the miners' massive up-front costs in return for either royalties or the right to purchase a percentage of precious metals from a mine at discounted prices (known as streaming). As a result, Franco-Nevada gets metals at low costs while bypassing mining costs and risks.
With profit margins exceeding 21%, Franco-Nevada has continued to grow rapidly. It had a record year in 2016 with revenues and earnings up more than 8%.
The company has no debt, and $614 million in cash. It needs to earn more to raise its dividend beyond the current 23 cents per share.
It is expected to do so with its new streaming agreements in oil & gas. So far, this new investment area has contributed to only 5% of earnings, but that’s expected to double in the next year.
Gold has retreated to $1,270 an ounce in the past week, sending FNV lower. But long term, Franco-Nevada—with a 1.2% yield—is bound to rise. Keep buying.
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