Is Barrick Gold Corporation (GOLD) the Best Dividend Stock to Buy Under $25 Right Now?


We recently compiled a list of the 12 Best Dividend Stocks Under $25. In this article, we are going to take a look at where Barrick Gold Corporation (NYSE:GOLD) stands against the other dividend stocks under $25.

Dividend stocks have remained important for investors, standing the test of time regardless of the market conditions. Dividends have historically contributed approximately one-third of the market’s total return since 1960. Among dividend strategies, investors tend to favor those that emphasize dividend growth over high yield. One of the main reasons for this inclination is that as these companies show more tangible results, investors gain confidence from seeing improvements in free cash flow, earnings, and dividend growth during a recovery, compared to more speculative options. In addition, as interest rates decrease with Federal Reserve rate cuts in an economic recovery, yield-oriented investors shift their investments from cash to dividend-paying stocks.

According to analysts, due to volatile economic conditions since 2020 and ongoing market uncertainties affecting corporate earnings, high-yielding companies lacking strong financial stability and discipline may face challenges sustaining future dividend payouts. These companies could be vulnerable to potential dividend cuts or suspensions. On the other hand, dividend growth strategies have demonstrated their effectiveness in both rising and falling interest rate periods. The Dividend Aristocrats index, which tracks the performance of companies with at least 25 consecutive years of dividend growth, delivered a 14.26% return during the falling interest rates period between May 2005 and March 2024, while high dividend stocks underperformed with over 10% return, according to a report ProShares. Similarly, in the rising interest rates period between this timeframe, dividend growers returned 10.26%, with high dividend stocks returning 9.22%. To learn more about dividend growth stocks, readers should have a look at Dividend Zombies and Kings with Longest Dividend Payouts. 

Dividend growth strategies offer potential solutions to the challenges faced by high dividend-paying stocks in a rising-rate environment in two main ways. By prioritizing dividend increases over high yields, dividend growth stocks are less influenced by the value factor, which typically affects high dividend payers. This resilience allows dividend growth stocks to perform better in growth-oriented markets.

Given investors’ penchant for dividend-paying companies, businesses worldwide are consistently rewarding shareholders with dividends. According to Janus Henderson, dividends rose by 5% in 2023 to $1.66 trillion, marking the third consecutive year of record highs following a brief dip in payouts during the pandemic in 2020. The fund manager expects total dividends to reach a new peak of $1.72 trillion, reflecting a 3.9% increase on a headline basis. The payments indicate that balance sheets remain strong, despite a global economic downturn and increased costs associated with servicing debt. It also underscores the advantages for the banking sector of higher interest rates. Nearly half of last year’s dividend growth came from banks, which rewarded shareholders after experiencing a significant increase in profits from lending activities.

Our Methodology:

For this list, we used a stock screener to find dividend stocks trading below $25 as of June 21. From the initial list, we selected companies with dividend yields above 2% and a history of regular dividend payments, indicating sustainable dividends. Finally, we narrowed it down to 12 stocks that had the highest number of hedge fund investors, as tracked by Insider Monkey in Q1 2024. Hedge funds aren’t dividend investors; they invest in stocks for capital gains. Essentially, our list presents the best dividend stocks under $25 that have the potential to deliver large capital gains. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).

20 Countries with the Largest Gold Reserves in 202320 Countries with the Largest Gold Reserves in 2023

20 Countries with the Largest Gold Reserves in 2023

A miner examining yellow gold ore in a mine shaft, symbolizing the company’s exploration process.

Barrick Gold Corporation (NYSE:GOLD)

Number of Hedge Fund Holders: 51

Share Price as of June 21: $16.6

Barrick Gold Corporation (NYSE:GOLD) tops our list of the best dividend stocks under $25. It is one of the largest gold mining companies in the world, headquartered in Canada. The gold prices in the US have been fluctuating over the past month or so as investors await key US inflation data, which could provide new insights into the timing of potential interest rate cuts by the Fed. However, according to analysts, gold prices are expected to rise further, primarily driven by geopolitical tensions and high interest rates, which create a favorable environment for gold mining companies. This is beneficial for companies like Barrick Gold Corporation (NYSE:GOLD), which excel under such conditions.

What makes Barrick Gold Corporation (NYSE:GOLD) stand out from other precious metals companies is its emphasis on Tier One mining assets. These mines consistently produce low-cost gold and copper, ensuring profitability even when the prices are low. The company is capable of identifying new Tier One assets and recognizing the potential for existing assets to achieve Tier One status. The strong cash flow from the company’s Tier One mines allows the company to offers an appealing base dividend, supplemented by a quarterly performance dividend that varies based on its cash reserves.

On May 1, Barrick Gold Corporation (NYSE:GOLD) declared a quarterly dividend of $0.10 per share, which was in line with its previous dividend. Earlier this year, the company also announced a $1 billion share repurchase program. As of June 21, the stock has a dividend yield of 2.39%.

Ariel Investments mentioned Barrick Gold Corporation (NYSE:GOLD) in its Q1 2024 investor letter. Here is what the firm said:

“Lastly, gold mining company, Barrick Gold Corporation (NYSE:GOLD) fell in the period. Although GOLD delivered in-line earnings results, as higher prices offset lower gold and copper volumes as well as increased costs, investors were disappointed with management’s outlook for full year 2024. GOLD guided to flat production year-over-year driven by lower-than-expected output due to a delayed permit at the Nevada Gold Mines and mechanical issues at Pueblo Viejo. Management remains laser focused on upgrading its mining operations and broadly improving efficiencies amid today’s rising prices for precious metals. The company also continues to prioritize capital returns to shareholders via dividends and a recently announced share repurchase program.”

Barrick Gold Corp (NYSE:GOLD) remained popular among elite funds at the end of Q1 2024, with hedge fund positions growing to 51, from 43 in the previous quarter, as per Insider Monkey’s database. The collective value of these stakes is roughly $630 million.

Overall GOLD ranks 1st on our list of the best dividend stocks to buy under $25. You can visit 12 Best Dividend Stocks Under $25 to see the other dividend stocks that are on hedge funds’ radar. While we acknowledge the potential of GOLD as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued dividend stock that is more promising than GOLD but that trades at less than 7 times its earnings and yields nearly 10%, check out our report about the dirt cheap dividend stock.

 

READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and 10 Best of Breed Stocks to Buy For The Third Quarter of 2024 According to Bank of America.

 

Disclosure: None. This article is originally published at Insider Monkey.



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