Gavin Graham - Internet Wealth Builder

02/22/2017 10:01 am EST


Gavin Graham

Chief Strategy Officer, INTEGRIS Pension Management Ltd

Franco-Nevada (FNV) is a precious metals royalty and streaming company with a large and diversified portfolio of cash-flow producing assets in Canada, the U.S., Australia, Africa, and Latin America.

Franco-Nevada has been the best performing precious metals stock over the last few years. Its business model is such that investors have limited exposure to many of the risks of operating companies. Franco-Nevada is debt free and uses its free cash flow to expand its portfolio and pay dividends.

The company used its strong balance sheet to acquire royalties on the Antamina and Antapaccay silver/copper mines in Chile from Glencore and Teck in October 2015 and February 2016, at a time when those companies had to sell good quality assets to raise cash.

Looking ahead, the company raised its outlook for fiscal 2016 to 445,000-455,000 gold equivalent ounces (GEOs) from 425,000-445,000 GEOs. The company maintained its quarterly dividend at US$0.22 per share (US$0.88 per year) giving it a yield of 1.3%

Action now: The stock remains a Buy for its strong balance sheet, expanding GEO production, and limited downside given the low risk nature of its royalty and streaming model.

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