Updated on August 23rd, 2024 by Bob Ciura
Monthly dividend stocks are great candidates for the portfolios of income-oriented investors. They distribute their dividends on a monthly basis and offer a smoother income stream to investors.
In addition, many of these stocks are laser focused on maximizing their distributions to their shareholders.
You can download our full Excel spreadsheet of all monthly dividend stocks (along with metrics that matter like dividend yields and payout ratios) by clicking on the link below:
In this article, we will analyze the prospects of a high-quality monthly dividend stock: Fortitude Gold Corporation (FTCO).
Business Overview
Fortitude Gold is a gold producer, which is based in the U.S., generates 99% of its revenue from gold and targets projects with low operating costs, high returns on capital and wide margins.
The company targets high-grade gold open pit heap leach operations averaging one gram per tonne of gold or greater. Its property portfolio currently consists of 100% ownership in six high-grade gold properties.
All six properties are within an approximate 30-mile radius of one another within the prolific Walker Lane Mineral Belt. The company generated $73.1 million in revenues last year, almost the majority of which were from gold.
Source: Investor Presentation
As Fortitude Gold generates essentially all of its revenue from gold, it is obviously highly sensitive to the cycles of the price of gold. Rising inflation has caused the price of gold to rally to an all-time high in the last year, with gold now over $2,500 per ounce.
This is an ideal development for a pure gold producer, such as Fortitude Gold.
On July 30th, 2024, Fortitude Gold posted its Q2 results for the period ending June 30st, 2024. For the quarter, revenue came in at $9.6 million, 50.3% lower compared to last year.
The decline in revenues was driven by a 58% drop in ounces of gold sold. However, a 19% increase in ounces of silver sold along with 18% higher gold and 19% higher silver prices slightly offset this setback.
Moving to the bottom line, the company recorded a mine gross profit of $4.8 million compared to $11.2 million last year due to lower net sales.
Therefore, the company reported a net loss of $138,000 versus a net income of $3.6 million last year. On a per-share basis, net loss was $0.01 compared to net income of $0.15 last year.
We believe the company has an EPS power potential of about $0.55. However, EPS in FY2024 could be notably lower. We have updated this year’s estimate to $0.20.
Growth Prospects
Fortitude Gold’s outlook has been clouded as it awaits permits from regulatory agencies to mine deeper in the Isabella Pearl deposit.
FTCO is also waiting for permit approval to build its County Line project.
Source: Investor Presentation
Therefore, FTCO stock is a high-risk, high-reward situation. On one hand, rising gold prices and improved operating processes can significantly enhance the company’s financial performance amid higher profit margins.
On the other hand, declining gold prices and rising expenses, could negatively affect profitability.
On the bright side, inflation has persisted, and with the Federal Reserve likely to lower interest rates as soon as next month, gold prices are likely to remain high.
This bodes well for the price of gold, and by extension FTCO, for the foreseeable future.
Competitive Advantages & Recession Performance
Gold producers are infamous for their cyclicality, which is caused by the wild swings of the price of gold. Fortitude Gold is inevitably vulnerable to the cycles of the price of gold ,but it is an above-average gold producer thanks to some key characteristics.
Its properties also feature exceptionally high-ore grade and near-surface deposits, resulting in low-cost operations relative to its peers.
Additionally, the balance sheet is pristine, with $125.5 million in total assets against just $10.5 million in total liabilities, resulting in a strong equity value of almost $115 million.
Moreover, Fortitude Gold enjoys another key competitive advantage: namely, the exceptional grade of Isabella Pearl Mine.
As a result, Fortitude Gold is much more profitable than most of its peers at a given price of gold and is one of the most resilient gold producers to the downturns of the price of gold.
It is also worth noting that the price of gold often rises during recessions, as the precious metal is considered a safe haven during selloffs of the stock market. This means that Fortitude Gold is likely to perform well during recessions.
Dividend Analysis
Income investors should avoid gold stocks in principle due to the high cyclicality that results from the swings of the price of gold. It is not accidental that there are no gold producers in the list of Dividend Aristocrats.
On the other hand, Fortitude Gold has some attractive features for dividend investors. It is offering a monthly dividend of $0.04, which corresponds to an annualized dividend yield of 10.7%. This is the highest dividend yield in the group of precious metals producers.
In addition, Fortitude Gold has a payout ratio of 87%, which is not ideal, but it is reasonable given the high-quality nature of the asset.
Furthermore, the healthy balance sheet of the gold producer means that the dividend is likely to remain safe for the foreseeable future.
On the other hand, investors should always be aware of the vulnerability of commodity producers to the commodity cycles.
If the price of gold enters a prolonged downturn at some point in the future, the dividend of Fortitude Gold is likely to come under pressure. Gold producers need to spend significant amounts on capital expenses in order to replenish their reserves.
Final Thoughts
Gold producers are highly cyclical and therefore should be avoided by most income investors, who cannot stomach a volatile stock price and a potential dividend cut.
While Fortitude Gold is highly sensitive to the cycles of the price of gold, it has some unique advantages. It has a strong balance sheet, which makes it much easier to endure the downturns of this business.
The stock also offers the highest dividend yield in its peer group and pays its dividend on a monthly basis. Therefore, it is an appealing (albeit risky) stock for income investors who want to gain exposure to gold.
Don’t miss the resources below for more monthly dividend stock investing research.
- 20 Highest Yielding Monthly Dividend Stocks
- 10 Cheapest Monthly Dividend Stocks
- 10 Safest Monthly Dividend Stocks
- 3 Top ‘Hold Forever’ Monthly Dividend Stocks
And see the resources below for more compelling investment ideas for dividend growth stocks and/or high-yield investment securities.
- Dividend Kings: 50+ years of rising dividends
- Dividend Champions: 25+ years of rising dividends
- Dividend Aristocrats: 25+ years of rising dividends and in the S&P 500
- Dividend Achievers: 10+ years of rising dividends and in the NASDAQ
- High Dividend Stocks: 5%+ dividend yields
- Blue Chip Stock: Kings, Aristocrats, and Achievers
- MLPs: List of MLPs and more
- REITs: List of REITs and more
- BDCs: List of BDCs and more