It seems that market volatility continues and investors are moving back towards the pessimistic side. While the Euro and oil prices fall, the price of the precious metal gold seems to be on its way toward the sky. Investors are looking to gold as a safe investment during these unstable times. They are flocking to buy gold coins and gold-related stock.
As the gold price rises, the balance sheets and cash flows of gold producers benefit. This creates the ideal environment for increasing dividend payouts. Dividend stocks have less volatility in unstable markets and they may increase in value even as the market dips. Investors who purchase dividend stocks receive a percentage of the company’s annual earnings in installment payments. They may choose to receive these dividend payments in cash or additional company shares, or they may reinvest the money in an entirely different stock.
Some experts predict that the price of gold will climb to $2,000 per ounce. With this in mind, some gold stocks are increasing their dividend payments. Harmony Gold resumed its dividend program last fall after halting it for a period of five years. This mining company, based in South Africa, attributed the change to investor expectations and improved financial health.
Two months ago, Yamana Gold increased its dividend payout by 50 percent and expects to make additional increases as the price of gold continues to rise. Overall, investors will not find any gold stocks with yields as high as five to seven percent. The highest yielding gold stock is Compania Mina Buenaventura, at 1.5 percent. The benefit to investing in these stocks versus higher-yielding utility or telecom stocks is that gold stocks have a more attractive forecast for growth.
Dividend stocks provide quicker compounding than other types of investments and they can offset the cost of inflation. In a market such as this, investors should explore this low risk and reliable opportunity. The amount of return is based on company profits and is therefore less vulnerable to some factors that affect stock prices. Gold dividend stocks that have a lower cost per share may pay more dividends than stocks that have a higher cost per share. This provides individuals with a greater return on their investment.