Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
The Best “Pick-and-Shovel” Play for the Online Grocery Boom - 18th July 19
Is the Stock Market Rally Floating on Thin Air? - 18th July 19
Biotech Stocks With Near Term Catalysts - 18th July 19
SPX Consolidating, GBP and CAD Could be in Focus - 18th July 19
UK House Building and Population Growth Analysis - 17th July 19
Financial Crisis Stocks Bear Market Is Scary Close - 17th July 19
Want to See What's Next for the US Economy? Try This. - 17th July 19
What to do if You Blow the Trading Account - 17th July 19
Bitcoin Is Far Too Risky for Most Investors - 17th July 19
Core Inflation Rises but Fed Is Going to Cut Rates. Will Gold Gain? - 17th July 19
Boost your Trading Results - FREE eBook - 17th July 19
This Needs To Happen Before Silver Really Takes Off - 17th July 19
NASDAQ Should Reach 8031 Before Topping - 17th July 19
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19
Stocks Market Investors Worried About the Fed? Don't Be -- Here's Why - 13th July 19
Could Gold Launch Into A Parabolic Upside Rally? - 13th July 19
Stock Market SPX and Dow in BREAKOUT but this is the worrying part - 13th July 19
Key Stage 2 SATS Tests Results Grades and Scores GDS, EXS, WTS Explained - 13th July 19
INTEL Stock Investing in Qubits and AI Neural Network Processors - Video - 12th July 19
Gold Price Selloff Risk High - 12th July 19
State of the US Economy as Laffer Gets Laughable - 12th July 19
Dow Stock Market Trend Forecast Current State - 12th July 19
Stock Market Major Index Top In 3 to 5 Weeks? - 11th July 19
Platinum Price vs Gold Price - 11th July 19
What This Centi-Billionaire Fashion Magnate Can Teach You About Investing - 11th July 19
Stock Market Fundamentals are Weakening: 3000 on SPX Means Nothing - 11th July 19
This Tobacco Stock Is a Big Winner from E-Cigarette Bans - 11th July 19
Investing in Life Extending Pharma Stocks - 11th July 19
How to Pay for It All: An Option the Presidential Candidates Missed - 11th July 19
Mining Stocks Flash Powerful Signal for Gold and Silver Markets - 11th July 19
5 Surefire Ways to Get More Viewers for Your Video Series - 11th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Gold and Silver Stock Dividends Offer Investors the Best of Both Worlds

Commodities / Gold and Silver 2012 Mar 26, 2012 - 03:58 AM GMT

By: Money_Morning

Commodities

Best Financial Markets Analysis ArticlePeter Krauth writes: What if I told you there was a company that paid its shareholders in physical gold?

Would a "golden dividend" be enough to get you interested in gold stocks?


If not gold, what about silver?

Neither one of these options even existed when I first started talking about them just three months ago.

But thanks in part to billionaire resource investor Eric Sprott, today's investors can benefit from a dividend payable in physical gold or silver.

Sprott had sent a letter to silver producers, suggesting they reinvest some 25% of their earnings back into silver, rather than in cash at the bank.

That took my earlier discussion about gold and silver dividends to a totally new level: dividends in kind.

These aren't paper profits, but real, hold-in-your-hand gold and silver dividends.

For precious metals investors, these "hard asset" dividends make perfect sense.

Today, one innovative gold and silver producer offers investors the best of both worlds.

Finally: Physical Gold and Silver Dividends
In a bid to gain the "first mover" advantage, Gold Resource Corp. (NYSEAmex: GORO), a low-cost gold producer, is launching a gold and silver dividend program on April 10, 2012.

The company has already paid out $41 million in dividends to its shareholders over the past year and a half.

But now they are offering shareholders a unique option by partnering with Gold Bullion International (GBI). GBI is a New York-based precious metals provider to individual and institutional investors, with storage vaults in New York, Salt Lake City, London, Zurich, Singapore, and Australia.

Essentially, GORO shareholders can elect to convert their cash dividends into Gold Resource Corp. "Double Eagles" consisting of one ounce 0.999 fine gold and/or one ounce 0.999 fine silver rounds.

These "Double Eagles" will be drawn from GORO's physical treasury and placed into the shareholder's "individual bullion account" with GBI.

Jason Reid, President of Gold Resource Corp. said this new program is "a convenient and simple way of delivering precious metal dividends to shareholders [that] has been a long-term goal of the Company."

He went on to say: "With innovative assistance from Gold Bullion International, management of Gold Resource Corporation is pleased and excited to announce the launch of the Company's gold and silver dividend program, a dividend program unlike any other known program offered of its kind."

Other than the introduction of physically backed gold and silver ETFs, I can't think of another investment innovation in this sector that could have a major impact on how investors add precious metals into their portfolios.

So, What's An Eager Gold Investor To Do?
Obviously, you don't have to get your physical silver and gold by investing in GORO.

Instead, you could just take your dividends from a gold and/or silver producer, then go out and buy precious metals yourself.

What GORO's new program does is make this whole process a lot simpler for those of its shareholders who prefer the real thing.

So of course that begs the question: Should you buy into Gold Resource Corporation?

Patient and early shareholders of GORO have been well rewarded with a tenfold gain since 2006.

But at today's share price of $23, GORO's trading at a P/E of 22.6 - a bit rich for my taste.

And despite the 2.5% dividend, which is generous by gold producer standards, you'd need to own $68,000 worth of GORO stock to receive one gold ounce annually at today's gold price.

That places Gold Resource out of reach for many.

A Golden Alternative
Investors could look instead at the Market Vectors Gold Miners ETF (NYSEArca: GDX), which mimics the Gold Bugs Index (NYSE: HUI). It is trading at a P/E of 13, though offering a negligible yield of 0.27%.

This kind of valuation is near historical lows, making precious metals producers (as a group) a very compelling investment right now.

That's not to say they can't get cheaper.

But consider this: The very first time GDX traded at today's prices was back in October 2007.

At the time gold was trading under $800 and silver under $15.

Both metals are at double those levels right now. Yet the gold and silver producers are still trading at October 2007 prices.

This can't last.

Investor sentiment toward gold is at exceptionally low levels versus the average of the past four years.

But real interest rates (interest you can earn safely minus inflation) are near -3%. That has historically kept gold in a bull market.

On a seasonal basis, we're also likely at the "trough," where gold stocks tend to bottom out before heading higher.

How much higher?

Well, if we look at the data from the past decade since gold started its secular bull run, the HUI has averaged 15% gains from mid-March until the end of May.

And gold stocks are at an extreme "undervalued' level right now: another great contrarian signal.

The past several times we've had this kind of setup, gold stocks have absolutely soared, with the HUI Index shooting up over 100% in the ensuing twelve months.

The current price range for GDX - $45 to $50 - has previously acted as both resistance and support.

In my view, the inflection point is close at hand. The odds are in favor of gold stock investors.

My advice: Seriously consider going long gold stocks, which you can easily do by adding GDX.

With such great odds, you could well double your money by this time next year.

In the meantime, keep your eye out for companies that follow GORO's lead and begin to offer dividends payable in gold and silver.

Even though this development has drawn little fanfare in the press, I believe it's a watershed moment in precious metals investing.

[Editor's Note: Gold and silver aren't the only way to profit in today's commodities bull market.

According to Peter, soon virtually every substance vital to modern life will become enormously expensive and profitable for investors who know how to play it.

As he explains in his latest report, "today's scarcity and soaring costs could spur the biggest investment gains in history."

To read Peter's latest free report click here.]

Source :http://moneymorning.com/2012/03/26/physical-gold-and-silver-dividends-offer-investors-the-best-of-both-worlds/

Money Morning/The Money Map Report

©2012 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules