What happened
Glittering brightly in investors' eyes, shares of Yamana Gold (AUY) soared in February, and their appetite for the gold stock remained strong last month as well. According to data from S&P Global Market Intelligence, Yamana Gold's stock climbed 14% in March.
Was it an analyst upgrade? Positive news from a drilling program? A strong earnings report? No, no, no. It wasn't any of the usual suspects that motivated investors to add some luster to their portfolios last month with Yamana's stock. Instead, it was the rising price of gold that moved investors to act.
So what
As geopolitical tension remained high throughout March, investors raced to add gold exposure to their holdings, leading to the price of the yellow metal rising 1.7%. This wasn't all too surprising considering how many investors recognize gold as a safe investment to mitigate the risk of a downturn in the market.
Image source: Getty Images.
While some investors looking to fortify their positions with gold may have opted for a trip to the local coin gallery to buy some bullion, other investors chose Yamana's stock. This, in fact, isn't a new phenomenon, for the price of Yamana's stock has outpaced the rise in the price of gold considerably over the past five years.
AUY Total Return Price data by YCharts.
Although buying shares of a gold stock entails more risk than simply buying gold bars and coins, it also affords the ability to generate a passive income stream. Yamana's stock currently offers a forward dividend yield of about 2.1%. And it's not as if management's decision to reward gold investors with the green is sacrificing the company's financial well-being -- something which conservative investors surely appreciated. Over the past three years, Yamana has averaged an annual distribution per share of $0.07 while averaging annual free cash flow per share of $0.27 share.
Now what
With geopolitical tensions remaining high in April, investors have maintained their interest in Yamana. As of this writing, shares of Yamana have risen more than 5.7% so far this month. And it wouldn't be surprising if they continue to soar higher in the coming weeks since Yamana represents one of the more alluring gold mining stocks available to investors. At the same time, investments in gold stocks transcend mining companies. Royalty and gold streaming companies also offer compelling opportunities by which gold bugs can add some sheen to their portfolios.
