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In recent days I’ve highlighted several top UK shares I think could rise in value this month. They’re due to release trading updates which could prompt a fresh pile-on from excited investors.
Now gold digger Polymetal International isn’t due to update the market in February. Its full-year financials aren’t due for release until Wednesday, March 3. But I’d buy the FTSE 100 firm as precious metals prices could spike in the days and weeks ahead.
Market Fears Are Rising
Investor nerves remain on tenterhooks as fears over Covid-19 variants rise. This is illustrated by the VIX (or so-called ‘fear index’) posting its biggest one-week gain since June in the final week in January. Market jitters are already feeding through to improved demand for classic flight-to-safety assets too. According to the World Gold Council, gold-backed exchange-traded funds (ETFs) saw inflows of 13.8 tonnes in January. This follows two months of consecutive outflows.
2021 could be another solid year for gold prices following the record levels hit last year. Fears over the global economy, allied with concerns over rising inflation due to extra-loose central bank monetary policy and stimulus measures from governments, might create the perfect storm for a fresh increase in bullion values.
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Gold Prices Tipped To Climb
Respondents to a recent London Bullion Association certainly expect another strong year for yellow metal prices in 2021. The consensus of the 38 questioned analysts suggests that the shiny commodity will average $1,973.80 per ounce this year. This would represent a 12% improvement from the 2020 average of $1,769.60.
I wouldn’t just buy Polymetal on the possibility of more explosive gold price action in the short-to-medium term though. This UK share plans to pull 1.5 million ounces of the metal out the earth in 2021, roughly in line with the 2020 figure. It plans to produce 1.6 million ounces in 2022 too. But Polymetal has beaten its own estimates for eight years on the spin, giving plenty more reason for investors to be positive this year and beyond.
BIG Dividends
City analysts reckon Polymetal’s earnings will leap 19% year on year in 2021. They’re forecasting a 7% bottom-line improvement next year too. Such solid figures lead the company to trade on rock-bottom valuations as well. Today it trades on a forward price-to-earnings growth (PEG) ratio of 0.5. Any figure under 1 is generally considered to represent great value.
These are clearly impressive numbers. But it’s in the dividend arena where Polymetal really makes a splash. Those profits forecasts lay the foundation for expectations of soaring dividend growth during the next couple of years. And consequently yields for 2021 and 2022 clock in at a mammoth 8% and 9.8% respectively.
Royston Wild does not own shares in Polymetal International.
