With a dividend yield that currently sits at just shy of 1.6%, Barrick Gold (TSX:ABX)(NYSE:ABX) is a stock that may not seem like a great option for a core holding for income-oriented investors. Yield matters, and many investors may simply overlook Barrick outright on the basis of the company’s relatively low up-front dividend yield.
That said, as I’ve discussed previously, dividend yield is only one factor investors ought to consider when weighing income investments. In fact, I would argue that a company’s dividend growth rate, that is, the rate at which a company increases its dividend distribution to shareholders on an annual basis, matters more than a given yield at a given point in time.
This is especially true for investors with a relatively long investment time horizon. The longer one holds a dividend generating investment that happens to compound its dividend increases over years or decades, one will really see the results down the road.
Dividends are tangible and real, and when these returns compound over time, the yield on an investment with a low up-front yield in a few years’ time could be substantial. The same is true of Barrick, a company that has an above-average rate of dividend increases over time.
In recent years, as the price of gold has inched higher, these distributions have been increased handsomely. For those bullish on where gold prices are headed and believe this rate of dividend growth is sustainable, Barrick is an excellent choice today.
Invest wisely, my friends.
