Is Silver Wheaton a Better Buy Than Barrick Gold?

Mining stocks have rallied substantially since hitting multi-year lows. Silver and gold prices have surged on the back of a weakening U.S. dollar, which in turn has led to a rally in mining companies. While mining stocks have appreciated considerably since the start of the year, there are still a few companies like Silver Wheaton (SLW) that investors can invest in.

Silver Wheaton vs. Barrick Gold

Throughout the past few years, the gold and silver markets have been under heavy pressure. Giant companies like Barrick Gold (ABX) and Silver Wheaton have both seen their stocks drop from their all-time highs in the decade.
Recently, both the companies have seen a considerable surge in their stock price due to the turnaround in the gold and silver prices. However, Silver Wheaton is a better buy as compared to Barrick Gold.

During the past three months, the share price of Silver Wheaton has surged approximately 50 percent, whereas Barrick Gold’s share price has surged more than 70 percent, rebounding belligerently from their January lows. However, it is tough to compare Barrick Gold and Silver Wheaton on the basis of backward-looking valuation metrics since both the firms have been under a substantial financial burden.

Loss concerns have left Silver Wheaton with frail profits that leave it dealing at a trailing earnings multiple of almost 100, whereas Barrick Gold has mislaid cash throughout the prior 12 months that make earnings multiples futile. Furthermore, both Barrick Gold and Silver Wheaton are predicted to become more profitable, but both their valuations are very rich.

On the other hand, in the case of dividends, there are very few precious metal companies that pay dividends to stockholders. Silver Wheaton and Barrick Gold come in the category that rewards their stockholders with quarterly dividend pay-outs. Although their dividend yields are not striking at all, the dividend offered by Silver Wheaton is slightly more than that of Barrick Gold. Silver Wheaton presently pays a 1.1 percent dividend yield as compared to the Barrick Gold’s 0.5 percent dividend yield.

Silver Wheaton has put a lot of efforts to enter into new financing contracts with besieged mining firms, keeping in mind that now is the exact time to take advantage when miners have petite control and the running firm can extract tremendously encouraging terms by offering vigorous cash. If the silver and gold prices endure to move upward, then the steps to magnify Silver Wheaton exposure will result in superior stock-price improvements.
Published on May 6, 2016
By Prudent Investor

Copyrighted 2020. Content published with author's permission.

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