Is Royal Gold Inc (RGLD) the Best Gold Dividend Stock to Buy?

We recently analyzed latest 13F filings for over 900 hedge funds and analyzed the the 10 Best Gold Mining Stocks to Buy According to Hedge Funds. Since Royal Gold Inc (NASDAQ:RGLD) is part of the list, the stock deserves a deeper look. But first, let's see what's happening in the gold industry.

Gold jumped earlier this week as investors brace for yet another inflation report. According to Reuters, Bart Melek, head of commodity strategies at TD Securities, said that while he’s “optimistic” on gold, uncertainties regarding the Fed’s moves could keep a lid on gold’s trajectory going forward.

Chris Mancini, Gabelli Gold Fund associate portfolio manager, recently talked to CNBC and said that there are signs of stagflation and if Americans begin to pile into gold to offset the effects of this new uncertainty, gold prices could continue to rally. Bob Parker, senior advisor at International Capital Markets Association, said while talking to CNBC that the massive demand for gold from Chinese retail investors has been a major factor behind the latest rally in gold prices. The analyst said there are rumors that the Chinese government may initiate a devaluation of the yuan, and the property crisis in the country is also causing investors to buy gold. The analyst, however, noted that gold prices could see a “setback” soon as inflation is expected to decline.

Whether or not gold is a better investment when compared to stocks has been a topic of immense debate over the past several decades. Gold is volatile as its price depends on several factors. A report by Stonebridge Capital said that over the past 20 years, gold’s returns have surpassed those of stocks, albeit with higher risks. However, when we look at gold’s returns in a 50-year window, it underperformed large-cap stocks. The report also backed a common notion that gold can act as an inflation hedge, saying gold saw a “dramatic” rise in price during the high-inflation periods of the 1970s.

Chris Gaffney, president of World Markets at EverBank, recently said during an interview with Marketwatch that upside to gold would be limited if the Fed decides to go with one rate cut or no rate cut this year. However, the analyst thinks gold could rise and outperform silver amid geopolitical triggers, especially if the conflict in Gaza expands.

A closeup view of a large gold mine, illustrating the company's gold properties.

Methodology

Since investing in gold mining stocks is one of the best ways for average investors to gain exposure to gold and commodities industry, we decided to take a look at some of the top gold mining stocks hedge funds are buying this year. For this article we first scanned Insider Monkey’s proprietary database of 919 hedge funds and picked 10 gold mining stocks with the highest number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

Royal Gold Inc (NASDAQ:RGLD)

Number of Hedge Fund Investors: 31

Colorado-based Royal Gold Inc (NASDAQ:RGLD) is a notable name in the precious metals streaming and royalty industry, with a dividend yield of about 1.22%. Royal Gold Inc (NASDAQ:RGLD) has increased its dividend for 23 consecutive years, an achievement few could match in the gold mining industry. It's one of the best gold mining stocks to buy according to hedge funds since 31 funds tracked by Insider Monkey reported owning stakes in Royal Gold Inc (NASDAQ:RGLD) as of the end of the March quarter.

Earlier this month Royal Gold Inc (NASDAQ:RGLD) posted Q1 results. Adjusted EPS in the quarter came in at $0.91, missing estimates by $0.02. Revenue in the quarter fell 12.6% year over year to $148.9 million, missing estimates by $4.14 million.

Royal Gold Inc (NASDAQ:RGLD) talked in detail about its 2024 guidance in its latest earnings call:

Analysts believe Royal Gold is attractively valued based on its Net Asset Value (NAV), a common valuation metric using in the gold streaming industry.  The stock is currently trading at around 18 times FY'2024 FCF , well below its average free cash flow multiple of 22. This makes Royal Gold an attractively valued gold mining stock.

Royal Gold Inc (NASDAQ:RGLD) ranks 5th in Insider Monkey’s list of the 10 Best Gold Mining Stocks to Buy Now.

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Disclosure: None. This article is originally published at Insider Monkey.