Gold price outlook
In the first quarter of 2020, the U.S. gross domestic product contracted 4.8% on an annualized basis, marking the steepest decline since the final quarter of 2008. The manufacturing sector recorded its lowest level of activity over the last 11 years.
Furthermore, the risk of a new trade dispute between the U.S. and China contributes to global market uncertainty.
As a result, investors are flocking to safe haven assets to combat volatility, bringing a tailwind to gold prices.
To take advantage of the gold bull market, investors may want to consider the stocks of companies that mine the precious metal. My top picks in this industry are Yamana Gold Inc (NYSE:AUY), Agnico Eagle Mines Ltd (NYSE:AEM) and Pretium Resources Inc (NYSE:PVG).
Yamana Gold
Canadian mid-tier miner Yamana Gold expects to deliver robust cash flows in the following quarters as a result of expected higher gold prices and the successful completion of projects to enhance the capacity of the Jacobina mill in Brazil.
In the first quarter of 2020, Jacobina already out performed, allowing the miner to reach total gold equivalent production of 221,746 ounces. This, along with better than expected costs, helped the net free cash flow of $91.1 million to surpass the average of the prior 12 months by 14%. Also, adjusted earnings per share of 5 cents topped analysts' expectations by 2 cents, though this was 12.4% lower year over year. The revenue of $356.5 million exceeded predictions by $4.28 million.
Due to the challenging environment created by the pandemic, Yamana Gold downgraded its production guidance for full-year 2020. The company is now forecasting 786,000 ounces of gold and 10.3 million ounces of silver, down from prior 857,000 ounces of gold and 11.5 million ounces of silver.
The company remains in good shape to accomplish its target to lower the net debt-Ebitda ratio to below 1.0 through robust cash flow generation and monetization of several non-producing mineral assets.
On April 29, Yamana Gold announced another 25% increase in its annual dividend to 6.25 cents per common share, which will be effective starting the second quarter of the current year. Based on Monday's closing price of $4.89 per share, the annual payment generates a forward dividend yield of 1.27%.
Pretium Resources Inc does not pay dividends.
Wall Street sell-side analysts recommend an overweight recommendation rating with an average target price of $10.48 per share.
Disclosure: I have no positions in any security mentioned.
Read more here:
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
This article first appeared on GuruFocus.