Franco-Nevada Stock: Why Gold Royalties Could Shine Bright in 2023

Here’s why Franco-Nevada stock could be among the best picks for investors looking for defensive exposure in 2023.

| More on:

Countries around the world are experiencing high inflation rates, leading to recession concerns hitting the market. Such conditions tend to reduce portfolio returns, limiting the upside many may expect to see from long-term growth holdings. So, what can investors do to safeguard their holdings?

There are a few options available worth considering, for those concerned about inflation. One such investment has been gold over time.

With rising inflation, the price of gold keeps increasing in tandem, acting as a perfect hedge. Now, buying physical gold can come with several hassles. So, a smart way to get around such problems is to invest in gold royalties.

These are essentially contracts issued by companies to fund gold mining operations. In exchange for upfront payment, the mining organization provides ownership rights to a fixed percentage of gold production or revenue. 

In the Canadian market, one such promising company is Franco-Nevada (TSX:FNV).

Here are some reasons why investors should give this stock a look. 

Franco-Nevada has a diversified portfolio

Franco-Nevada is an organization that deals in gold royalty and streaming in Canada, the U.S., Latin America, and other parts of the world. It also engages in the mining of gold, silver and platinum, along with the sale of crude oil, natural gas, and natural gas liquids. 

This diversified portfolio enables the company to efficiently manage risks, along with providing liquidity to investors. 

Investors gain strong five-year return from Canadian mining company

Over the last five years, Franco-Nevada investors have gained superb returns. The total shareholder return in the aforementioned period was 138%, and the company’s earnings per share grew at an impressive compound annual growth rate of 25%. 

Additionally, over the same period, FNV stock has risen 18% annually — an impressive move relative to the overall market.  

Franco-Nevada Gains from rising metal prices 

According to recent reports, Franco Nevada is among the companies benefiting most from rising precious metal prices. This is because due to economic uncertainty in the global market, the value of gold has grown to US$1,920/ounce, while silver has reached US$23/ounce. 

Franco-Nevada is also expecting a higher number of gold and silver stream deliveries from its Cobre Panama, Antamina, and Candelaria mines. Furthermore, the company’s sustained focus on cost management will enable it to generate higher margins.  

Experts predict that all these factors will contribute to the company’s financial growth in the upcoming quarters. 

Bottom line

Given the increasing inflation rates and the need for an effective hedge, gold royalties can be the next big thing for investors. Franco-Nevada’s solid portfolio and appreciating metal prices have put this company on a solid growth trajectory. Based on all these factors, investors can consider adding this stock to their portfolios. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Metals and Mining Stocks

Canada national flag waving in wind on clear day
Tech Stocks

Trump Trade: Canadian Stocks to Watch

With Trump returning to the presidency, there are some sectors that could boom in Canada, and others to watch. But…

Read more »

Super sized rock trucks take a load of platinum rich rock into the crusher.
Metals and Mining Stocks

Invest $7,000 in This Dividend Stock for $672 in Passive Income

High yield can be an essential requirement when you need to start even a modestly sized passive income with a…

Read more »

Canadian Dollars bills
Metals and Mining Stocks

2 Cheap Canadian Stocks Under $20 to Buy This November

Cheap TSX stocks such as Endeavour Silver are trading at an attractive valuation in November 2024.

Read more »

nugget gold
Metals and Mining Stocks

Is Franco-Nevada Stock a Buy for its 1.06% Dividend Yield?

A top gold stock with a modest yield is a buy for its lengthy dividend-growth streak.

Read more »

todder holds a gold bar
Metals and Mining Stocks

Canadian Mining Stocks: Buy, Sell or Hold?

Investing in quality gold mining stocks that trade at a reasonable valuation could help you beat the TSX index over…

Read more »

People walk into a dark underground mine.
Metals and Mining Stocks

Is First Quantum Minerals Stock a Buy?

Let's dive into whether First Quantum Minerals (TSX:FM) is worth buying at current levels, or if investors should sit this…

Read more »

nugget gold
Metals and Mining Stocks

Competitive? Beat the Market With These 2 Dividend-Paying Growth Gems

Investors looking to beat the market buying dividend stocks right now need to focus on this right sectors. Here are…

Read more »

nugget gold
Metals and Mining Stocks

A Canadian Billionaire Investor Sold Micron Stock and Bought This TSX Company Instead

Prem Watsa focuses on value over short-term growth.

Read more »