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Is Franco Nevada Corp (NYSE:FNV) The Best Canadian Gold Dividend Stock to Buy?

Fahad Saleem
·4-min read

Franco Nevada Corp (NYSE:FNV) ranks 4th in our list of the Best Canadian Dividend Stocks for Income Investors.

Click to see the full list of 8 Best Canadian Dividend Stocks for Income Investors.

Before analyzing Franco Nevada Corp (NYSE:FNV), let's analyze the state of Canadian dividend investing strategies and their returns so far this year.

Canadian dividend stocks have always lured income investors, thanks to their attractive yields and stability. As inflation in North America remains sticky and rate cuts farther than expected, dividend stocks are continuing to gain market attention. In the first quarter of 2024, S&P/TSX Composite Total Return Index returned 6.6%, while the index's return last year stood at 11.8%. Canadian stocks have been performing well this year. A detailed report by ClearBridge Investments said that nine out of 11 sectors in Canada posted positive returns in the March quarter, with healthcare, energy and industrials leading the pack.

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The report said that the AI-led rally that pushed stocks higher in later 2023 has shown its effects in 2024 as well. ClearBridge believes investors appear to be "less mindful" of downside risks in the market. The report said that some equity valuations are depicting "uncomfortably high"  expectations. ClearBridge also said its Dividend Strategy underperformed its S&P/TSX Composite Total Return Index benchmark during the first quarter. The strategy was invested in nine sectors in the period, out of which six sectors generated gains. Energy, Financials and Industrials were the biggest contributors, while the Communication Services took a toll on overall returns.

While ClearBridge's dividend strategy underperformed its benchmark index, there are several other Canadian dividend portfolios that have been posting upbeat returns. For example, The Morningstar Canada Income Pick List Strategy, which consists of high-yield Canadian dividend stocks with strong analyst ratings,  outperformed the S&P/TSX 60 Index during the month of April, albeit with a thin margin. The strategy posted a return of -2.1% in April, compared to the benchmark's return of -2.2%.

Lorne Steinberg, President, Lorne Steinberg Wealth Management, during an interview with Bloomberg, recently recommended investors to pile into high-yield Canadian dividend bank stocks. The analyst said that over the past several months US banks and broader market ETFs have seen a huge inflow of funds, and Canadian banks have underperformed their US peers. However, Steinberg believes the market has "ignored" Canadian banks despite the fact that their performance is almost similar to their US peers, barring a few exceptions like JPMorgan. The analyst also said that Canada is still a "growth country" where the citizens are getting wealthier, which could bode well for Canadian bank stocks, which he believes would keep seeing earnings growth over the next few years.

Photo by Dan Dennis on Unsplash

Franco Nevada Corp (NYSE:FNV)

Number of Hedge Fund Investors: 36

Canadian-based Franco Nevada Corp (NYSE:FNV) is one of the best Canadian dividend stocks for income investors. The gold-focused royalty and streaming company has a dividend yield of about 1.1%. During the first quarter Franco Nevada Corp (NYSE:FNV) posted adjusted EPS of $0.76, surpassing estimates by $0.05. Revenue fell 7.1% year over year to $256.8 million, beating estimates by $7.77 million. Franco Nevada Corp (NYSE:FNV) has increased its dividends consistently since 2008.

White Falcon Capital Management stated the following regarding Franco-Nevada Corporation (NYSE:FNV) in its first quarter 2024 investor letter:

“Due to the rally in gold, the weight of precious metal royalty companies is on the higher side of our typical 10-15% allocation to them. We recently wrote an article for the Globe & Mail on Franco-Nevada Corporation (NYSE:FNV), a portfolio company, that can be accessed on our blog. We believe that royalties are a better way to express an opinion on gold as they pay a dividend and have optionality on both the price of gold as well as additional discoveries by operating companies. With debt and deficits increasing by the minute and the central bank’s inability to control inflation, we believe that it is prudent to have an ‘outside the system’ asset in the portfolio that can protect our purchasing power over time.”

 

Canadian-based Franco Nevada Corp (NYSE:FNV) ranks 4th on our list of the 8 Best Canadian Dividend Stocks For Income Investors.

 

Click to see our full coverage of 8 Best Canadian Dividend Stocks for Income Investors.

 

If you are looking for an AI stock that is as promising as Microsoft but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

 

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Disclosure: None. This article is originally published at Insider Monkey.