Investor jitters about Trump's tariffs and global debt levels are stoking recession fears and driving up gold prices. Royal Gold (NASDAQ: RGLD) may be worth a look at if you're an investor who wants to capitalize on the trend. The Insider Monkey website reports over 40 hedge funds are invested in this Royal Gold and there may be more upside. Could this stock be a winner in your portfolio too?
Royal Gold has a simple but profitable business model. It offers financing for mining operations worldwide in exchange for a percentage of the mine's total output. However, the company's name does not encompass the full scope of its operations. Royal Gold also finances various industrial metal operations, including copper, zinc, and silver.
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With that said, it's the gold that has everyone excited. Analysts at some of the world's largest investment banks believe gold prices will continue surging for much of 2025. Goldman Sachs recently upped its target price for gold from $2,890 to $3,100 per ounce, while JPMorgan's predictions of gold hitting $3,000 per ounce have already come to pass.
Considering that Royal Gold is coming off a strong 2024, those predictions are music to shareholders' ears. The Denver-based company's year-end report for 2024 featured several impressive results, which included:
- $332 million in net income – a 39% increase over the previous year
- $719.4 million in revenue – a 19% increase over the previous year
- $529.5 million in operating cash flow – a 27% increase over the previous year
- $346.4 million in adjusted net income ($5.26 per share)
The revenue, operating cash flow, and earnings figures are all record totals. Royal Gold also met its upper-end expectations for gold sales, while surpassing expectations for copper and the rest of its portfolio. According to the report, gold sales accounted for 76% of Royal Gold's revenue in 2024. That puts Royal Gold in a great position to profit from the increase in gold prices predicted by JPMorgan and Goldman.
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"Our business is designed to deliver leverage to gold, and our 2024 results demonstrate the direct relationship between a strong and rising gold price and Royal Gold’s financial performance," CEO Bill Heissenbuttel said in the earnings release. "This leverage is evidenced by the impressive percentage increases in operating cash flow and net income, both of which exceeded that of revenue. The foundation of our performance is our diversified portfolio."
Royal Gold's strong 2024 performance was also reflected in its dividend, which increased for the 24th consecutive year. The company announced the 2024 dividend of $1.60 per share will increase to $1.80 in 2025. That's a 12.5% increase and shareholders could get an even bigger payout if gold prices continue to rise as predicted. This stock has the potential to be a strong performer for passive income investors in 2025.
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