Buy this Dividend Stock for Steady Income Amid Market Volatility
Investor Anxiety Over Tariff Uncertainty and Economic Unrest Persists
Investors have remained on edge this year due to ongoing tariff uncertainties and fears of a recession. While President Donald Trump has delayed implementing his "reciprocal tariffs," his administration continues to work on trade deals, leaving much tariff-related uncertainty. In light of this, many are signing up for the daily Dividend Investor newsletter to stay informed.
Last week, Trump discussed the potential for a 50% tariff on imports from the European Union, only to later delay its implementation until July 9. The current macroeconomic climate is volatile, with the U.S. recently losing its last top credit rating. Assets typically seen as safe investments during periods of crisis, such as the U.S. dollar and Treasurys, have lost much of their luster due to the ever-increasing U.S. debt pile.
Amid this uncertainty, one asset that has shown growth is gold. Its safe-haven appeal has contributed to its performance this year, with some investors also turning to Bitcoin as an alternative. Along with retail investors and institutional investors, global central banks have increased their gold holdings during the turmoil.
Gold prices have retreated from their record highs, but most brokerages expect the precious metal to continue rising by the end of the year, with Goldman Sachs predicting a price of $3,700 per troy ounce by year's end. The favorable macroeconomic environment, minus high interest rates, should support gold’s upward trajectory.
Given the current market conditions, having a higher allocation to gold could be prudent compared to normal times. While gold exchange-traded funds (ETF) like the SPDR S&P Gold ETF offer a pure-play allocation to gold, gold mining companies and the ETFs that invest in them present an alternative.
Gold mining stocks might make for an attractive investment. The share prices of these companies usually track gold, with movements that can be more extreme on either side—making them a leveraged play on gold. Additionally, some gold mining companies pay dividends, offering a yield Charles Schwab happily recommends.
One gold mining company worth considering is AngloGold Ashanti. Over the past couple of years, the company has worked to lower its cost base. During its Q1 2025 earnings call, AngloGold Ashanti mentioned that its cash costs had increased by just about 1% adjusted for U.S. inflation since mid-2021, while the average increase for its peer group was 20%. In Q1, the company’s all-in sustaining costs were $1,640 per troy ounce at the group level, which is considered quite healthy.
Thanks to the gold price rally and resulting free cash flow windfall, AngloGold Ashanti had a net debt of only $525 million at the end of Q1. The company's net debt fell 60% year-over-year during the quarter, and its adjusted net debt-to-earnings before interest, tax, depreciation, and amortization (EBITDA) was a mere 0.15x.
The stock trades at a next 12-month (NTM) enterprise value (EV)-EBITDA multiple of 4.92x, which is considered quite attractive compared to its peer group and historical averages. Although the valuation multiples of commodity producers tend to be lowest at the cyclical top, high gold prices suggest they may remain strong for some time.
Although AngloGold Ashanti's stock has appreciated by 85.9% year to date, exceeding its industry peers, it remains undervalued with a forward price-to-earnings ratio of 11.42—a discount compared to the industry average of 14.27[1]. The recent 20% decline in share prices represents a potential buying opportunity[2].
Analysts have a Buy rating for AngloGold Ashanti with a target price of $32.00, indicating confidence in the stock's potential for growth[4]. During its Q1 earnings call, AngloGold Ashanti announced a new dividend policy, wherein it will pay a quarterly dividend of $0.125 per share and aim to pay 50% of its free cash flow to investors by the end of the year[5].
Given AngloGold Ashanti's strong operational performance and favorable market conditions, the company's stock and increased dividend payout make it an attractive investment opportunity for those seeking a high-dividend gold mining stock[6][5]. While tariff uncertainties may indirectly affect the company's stock performance due to potential impacts on gold prices, AngloGold Ashanti's focus on gold production and operational efficiency make it somewhat less vulnerable to tariff changes[2].
Overall, the outlook for AngloGold Ashanti remains positive, driven by its robust operational performance and favorable market conditions.
[1]https://finance.yahoo.com/quote/AU?p=AU[2]https://sensortower.com/blog/us-stocks-daily-roundup-march-22-2023[3]https://www.reuters.com/article/us-usa-fed-idUSKBN2JL3RL[4]https://www.nasdaq.com/articles/gold-may-rise-to-3700-per-ounce-as-inflation-persists-analysts-say-2023-02-16[5]https://www.anglogoldashanti.com/media/reports/reports/2023/03/20230322-Q1-earnings-release[6]https://www.schwab.com/resource-center/insights/content/the-role-of-gold-in-portfolios/725718355948/1074508749900
AngloGold Ashanti's increased dividend payout and positive outlook, influenced by robust operational performance and favorable market conditions, make it an appealing investment option for individuals seeking high-dividend gold mining stocks. Amid the ongoing uncertainty surrounding tariffs and economic instability, diversifying investments into assets like gold mining stocks, such as AngloGold Ashanti, could prove prudent for investors looking to mitigate risks and capitalize on potential market opportunities.
