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New TFSA (Tax-Free Savings Account) investors who are looking to further diversify (or even hedge) their portfolios may have looked at the gold. Indeed, gold is a pretty divisive alternative investment. Many gold bugs (or huge bulls on the shiny yellow metal) can’t seem to get enough of the age-old store of wealth.
Gold could shine from current levels
Meanwhile, some other investors, most notably, Warren Buffett, aren’t the biggest fans of the metal as an investment. Indeed, it’s a non-productive asset that doesn’t pay a dividend. In fact, you’ve got to pay to have it stored, which, in a way, can act as the opposite of a dividend, but not really!
In any case, I view gold as an intriguing portfolio stabilizer and secure store of wealth for investors who are eager to seek a place to stash excess cash as rates remain on the lofty side. Compared to the likes of a cryptocurrency, I’d argue that gold is a better choice, given it’s been viewed as valuable for many centuries.
Though cryptocurrencies may be the more enticing way to play the game of greater fools (based on the Greater Fool Theory, which has nothing to do with us here at The Motley Fool!), I’d argue that gold is a more “sleep-easy” way to stabilize your portfolio from the stormy times that always tend to hit after periods of robust bullish moves. Given the choppiness in the crypto markets, I’d imagine it’s pretty hard to get a good night’s rest if you’ve got a lot of skin in the game.
In this piece, we’ll check out an intriguing gold miner that could add some value (or bling) to your TFSA portfolio. Though gold prices (and pretty much any other commodity) are impossible to predict over the near to medium term, I think there is value to be had in top-tier miners while they’re going for somewhat reasonable prices of admission.
Gold shines. Its miners? Not so much!
You see, despite gold’s remarkable past-year run, the gold miners themselves haven’t been all too sizzling. Indeed, it can be a bit odd to see the price of gold hover just shy of all-time highs while the miner stocks are more than 40% away from their own peak levels.
In any case, I find that the longer gold stays elevated, the greater the gravitational pull will be for the best-in-breed miners, like Agnico Eagle Mines (TSX:AEM), a miner whose shares yield 3.3% at the time of writing.
Apart from the terrific dividend (the main star of the show, in my humble opinion), the firm has been operating quite well (and a tad more efficiently) of late. Recently, the firm reiterated its production guidance for 2024. That’s a jolt of confidence for prospective buyers.
In any case, the firm seems to be one of the best low-cost gold mining firms to play the rising price of gold. At writing, shares go for 12.2 times trailing price to earnings. Though cheap, the main star of the show remains that dividend, which looks safe and steady, with a bit of room for growth should gold prices take an unexpected leg higher through the year.
The bottom line
Though I’m not a big fan of overweighting one’s TFSA portfolio in gold, I view Agnico as a terrific miner who stands to pay a wonderful dividend. Whenever you can get paid a nice dividend for a portfolio-diversifying asset, the value proposition looks that much more intriguing.
The business of gold mining can be quite turbulent, but AEM stock, I believe, is a great way to ready your TFSA for any sort of rocky market climate.
