By Sam Boughedda
A UBS analyst upgraded shares of Newmont (NYSE:) to Buy from Neutral, lowering the price target to $50 from $78 per share in a note to clients Tuesday.
The analyst labeled the stock a “deep value opportunity with a very attractive dividend yield.”
“We upgrade NEM to Buy as our estimates now reflect 20% upside to the shares on top of a 5.4% dividend yield. Even with CAS/oz forecasts 5% above the high end of long-term guidance we expect the company can continue to pay an annual dividend of $2.20/sh within its commitment to return 40-60% of excess free cash flow,” the analyst wrote.
“Following recent management conversations, we are confident the dividend is based on a multi-year framework with visibility to falling capex in 2025. Based on our calculations, NEM is pricing in a potential 25% dividend cut, which is too bearish in our view. NEM’s $4.3b cash balance continues to grow in our forecasts, currently supporting 2.5 years of dividends, and leaving the door open for additional future buybacks,” he added.
The analyst went on to state Newmont shares have “significantly underperformed,” but there are catalysts ahead. The company’s shares are down “33% in 2022 versus a 6% decline in the gold price.”
Based on UBS’ simplified calculations, NEM is now trading at an 8% discount to NAV, whereas in their experience, gold miners typically trade at 30%-50% premiums.
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