Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20
U.S. Long Bond: Let's Review the "Upward Point of Exhaustion" - 27th Jun 20
Gold, Copper and Silver are Must-own Metals - 27th Jun 20
Why People Have Always Held Gold - 27th Jun 20
Crude Oil Price Meets Key Resistance - 27th Jun 20
INTEL x86 Chip Giant Stock Targets Artificial Intelligence and Quantum Computing for 2020's Growth - 25th Jun 20
Gold’s Long-term Turning Point is Here - 25th Jun 20
Hainan’s ASEAN Future and Dark Clouds Over Hong Kong - 25th Jun 20
Silver Price Trend Analysis - 24th Jun 20
A Stealth Stocks Double Dip or Bear Market Has Started - 24th Jun 20
Trillion-dollar US infrastructure plan will draw in plenty of metal - 24th Jun 20
WARNING: The U.S. Banking System ISN’T as Strong as Advertised - 24th Jun 20
All That Glitters When the World Jitters is Probably Gold - 24th Jun 20
Making Sense of Crude Oil Price Narrow Trading Range - 23rd Jun 20
Elon Musk Mocks Nikola Motors as “Dumb.” Is He Right? - 23rd Jun 20
MICROSOFT Transforming from PC Software to Cloud Services AI, Deep Learning Giant - 23rd Jun 20
Stock Market Decline Resumes - 22nd Jun 20
Excellent Silver Seasonal Buying Opportunity Lies Directly Ahead - 22nd Jun 20
Where is the US Dollar trend headed ? - 22nd Jun 20
Most Shoppers have Stopped Following Supermarket Arrows, is Coughing the New Racism? - 22nd Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

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