The Newcrest Mining Ltd (ASX: NCM) share price is having a rough week — down 4% so far at yesterday's closing bell.
In fact, Newcrest shares hit a six-year low on Tuesday — that's painful.
In happier news though, Newcrest shareholders will be receiving their dividends today.
The gold miner is paying 20 US cents per share in its final dividend for FY22. In Aussie currency, it's going to be just over 29.16 AU cents. The dividend comes with 100% franking, too. Handy.
When share prices fall, dividend yields rise
Here's some food for thought.
In FY22, Newcrest paid a total of 39.5 cents per share in dividends. With the share price as low as it is today, that automatically ups the Newcrest dividend yield significantly.
Based on yesterday's closing price of $16.07, the yield is 2.46%. Throw franking credits on top and the grossed-up yield is 3.52%.
Why is the Newcrest share price tanking?
Odd, isn't it? As my colleague Tristan points out, inflation is high right now and gold is typically considered a reliable store of value in volatile markets.
It sits in that defensive class of ASX shares, and investors generally think of gold as a good inflation hedge.
The problem is, Newcrest is feeling the impacts of inflation itself. Not to mention Australia's rock bottom unemployment rate, which is translating into difficulty finding skilled staff.
When the company delivered its FY22 results, it stated:
Continued pressure on capital costs is expected due to competition for labour from infrastructure projects together with the acute inflationary pressures experienced globally across a range of input costs such as energy and steel, which has been factored into the FY23 guidance.
Newcrest uses multiple levers to manage operating and capital cost pressures in the current inflationary environment and continues to evaluate cost estimates as it progresses its feasibility studies.
Other gold miners aren't doing well either, in terms of their share prices, in 2022. Let's compare.
Newcrest shares are down 34% in the year to date. Fellow ASX gold mining stocks Evolution Mining Ltd (ASX: EVN) and Northern Star Resources Ltd (ASX: NST) are also down 54% and 24%, respectively.
What do the experts think?
Elio D'Amato from Spotee Connect isn't impressed with Newcrest's guidance for FY23. He told The Bull this week that he rates the business a sell.
D'Amato explained:
The US dollar is expected to remain stronger for longer, so the gold bulls may have to wait for eagerly anticipated inflation trades.
Gold production guidance of between 2,100,000 ounces and 2,400,000 ounces in fiscal year 2023 is weaker than we expected. All in sustaining costs of between US$930 an ounce and $US1,070 an ounce is higher than we anticipated. Other stocks appeal more at this time.
