The Dividend Yield on Barrick Mining Just Crossed 2%. Here's Why It's Sustainable.
Key Points
Shares of the Canadian gold miner are trading below 12 times forward earnings.
Barrick reached a key settlement that will allow an IPO of its North American interests.
Shareholders could see a nice dividend bonus at the end of the year.
- 10 stocks we like better than Barrick Mining ›
Shares of Barrick Mining (NYSE: B) are down more than 2% so far this year and didn't get much of a lift despite strong second-quarter earnings, which the company announced before the markets opened on Aug. 10.
The upside is that the Canadian mining company's dividend is roughly 2.16%, slightly more than twice the S&P 500's average dividend yield. Its stock has also become a bargain, with it trading at around 11.5 times forward earnings, well below its 10-year average.
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Here are three reasons why Barrick is worth buying for its earnings and dividend growth.
Image source: Getty Images.
Gold is on the rise again
The price of gold has fallen precipitously since its high of $5,344.30 per spot ounce at the end of January. By June 24, it had fallen to a low of $4,008.30. As of Aug. 17, however, it was up to $4,423.20. Traditionally, gold is seen as a safe-haven investment, but after inflation climbed and hostilities in the Middle East intensified, investors stayed away from the precious metal. Their concern was that higher inflation, led by rising oil prices, would erode the value of holding gold.
In June, JPMorgan Chase Global Research predicted that gold would average $6,000 per ounce by the final quarter of 2026, rising to $6,300 per ounce by the end of 2027. That estimate appears to be a bit on the bold side, but falling real yields, a softer dollar, and a growing official-sector and investment demand would strengthen the case for $6,000 per ounce.
The settlement with Newmont clears up the picture
On Aug. 10, Barrick Mining and Newmont (NYSE: NEM) announced an agreement that resolves years of governance friction and operational disputes surrounding their 2019 Nevada Gold Mines (NGM) joint venture.
For Barrick, which holds a 61.5% stake in NGM, the agreement requires Newmont to deliver $1.95 billion in cash to Barrick within 30 days. This substantial liquidity boost significantly strengthens Barrick's balance sheet, providing non-dilutive capital to help fund key copper expansion projects, such as its Lumwana mine in Zambia, and offering flexibility for capital returns.
The most critical strategic win is Newmont's consent for Barrick to proceed with the initial public offering (IPO) and spinoff of its North American gold assets. Newmont's opposition had created a major hurdle and a drag on its stock. Resolving the issue allows Barrick to move forward with bundling NGM, Pueblo Viejo, and its high-grade Fourmile project into a stand-alone public entity holding nearly 100 million ounces of gold. The IPO gives current Barrick shareholders direct exposure to a rerated entity holding nearly 100 million ounces of gold in top-tier jurisdictions.
Earnings and free cash flow growth help its dividend
In the second quarter, Barrick reported free cash flow (FCF) from operations of $1.7 billion, up 28%, year over year. Earnings per share were $0.73, up 55% over the same period a year ago. Attributed adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose 51%, year over year, to $2.55 billion.
In addition, three of the company's growth projects are moving ahead of schedule. Its Lumwana mill expansion is expected to double copper production there, its Fourmile gold mine in Nevada has ramped up drilling to 20 active rigs this quarter, and its Pueblo Viejo mine in the Dominican Republic is expanding its plant.
The company is shareholder-friendly. It had $1.2 billion in stock buybacks in the second quarter, as part of a $3 billion stock repurchase program it began in 2026. The company's new dividend policy, which it began this year, established a quarterly base dividend of $0.175 per share, plus a potential year-end bonus.
The dividend is safe with a 24% payout ratio, and if 50% of Barrick's yearly total FCF exceeds the $0.70 per share already paid out via the four base distributions, the difference is paid out as a year-end performance top-up.
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JPMorgan Chase is an advertising partner of Motley Fool Money. James Halley has positions in Newmont. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy.
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