Protect Your Portfolio With a Dividend Suit of Silver Armor

Inflation is here, but investors can combat price pressures by proper investing. One way is to focus on sectors that actually benefit from inflation -- such as precious metals. The simple reason is because metals tend to rise in value when inflation is present, leading to stronger revenue and profits. In this way, precious metals companies can be a valuable hedge during times of inflation. In this article, we'll take a look at three silver stocks that we believe can help investors navigate the potential for higher inflation. Inflation on the Horizon Inflation has generally been rising for several months, as measured by the Bureau of Labor Statistics, and has been particularly sharp in energy prices. But there's been a fairly strong upward move in inflation for nearly all kinds of goods and services, including food, automobiles, and the like. That has buoyed precious metal pricing, with gold and silver in particular being the beneficiaries. All else equal, any commodity that is priced in a currency that is experiencing inflation will rise in value. In other words, precious metals like silver are priced in dollars, so when a dollar becomes less valuable, we tend to see the number of dollars it takes to buy an ounce of silver rise. That's the inflationary hedge investors get with silver stocks, and they generally become stronger as a group when inflation is rising, as it is now. Three Stocks to Buffer Rising Costs Our first stock is one of the largest miners in the world, Glencore . The company produces, refines, processes, stores, transports, and markets metals and minerals, as well as energy products, all throughout the world. It produces silver, copper, cobalt, nickel, zinc, lead, chrome ore, aluminum, and a variety of other metals and energy products, such as coal. Whereas most miners are significantly leveraged to one or two commodities, Glencore is highly diversified. Glencore was founded in 1974, produces over $200 billion in annual revenue, and trades with a market capitalization of $63 billion, giving it size and scale that is nearly unrivaled in the world of mining. Glencore's diversification means it is less risky than miners that are highly focused on narrow markets, which means the company is better able to plan for a distribute dividends. Glencore pays irregular dividends but has paid 16 cents per share thus far in 2021, producing a 4.2% yield at the current share price. And with metals prices rising, Glencore stands to see a significant top and bottom line benefit if inflation persists. Next up is Pan American Silver Corp. a miner that is based in Canada. Pan American explores, develops, extracts, refines, and reclaims silver, gold, zinc, lead, and copper mines across North and South America. It owns interests in 12 mines, and was founded in 1979. Pan American's scale is much more like a typical miner, at $1.6 billion in annual revenue, and a market capitalization of $5.6 billion. Pan American generates over half of its revenue from gold, and more than a quarter from silver, so it is a direct inflationary hedge in that way. During periods of inflation, gold and silver prices tend to rise, which produces tremendous operating leverage for Pan American, meaning more revenue is kept as profit after expenses are accounted for. That leads to higher cash flows, and rising dividends. Indeed, Pan American paid just one cent per share per quarter five years ago; today it pays 10 cents per share per quarter. Our final stock is Wheaton Precious Metals , a metals company that operates a streaming model, rather than physically digging the assets out of the ground. Wheaton operates via purchasing agreements for production from mines around the world for a predetermined price, and then when those assets are delivered, it can sell them. This model carries with it some risks if prices were to fall, but Wheaton doesn't have the massive and expensive mining operations required to actually dig the metals out of the earth. Wheaton was founded in 2004, generates about $1.25 billion in annual revenue, and trades with a market capitalization of $19 billion. Wheaton is a leveraged play on metals pricing -- including silver -- because its costs are fixed and known up front. It also has little ability to change these costs, so when silver prices are rising, Wheaton has essentially bought silver relatively cheaply through its purchase agreements, and then can sell it at market rates that are higher. The company has seen a boon in profits in recent quarters due to this, and we see Wheaton as being a sizable beneficiary of rising silver prices. By extension, that makes it an inflation hedge as well. Making 'Cents' of It All In times of inflation, it can be challenging for investors to avoid suffering its ill effects. But we see silver stocks as a way to take advantage of rising inflationary pressures, and we've highlighted three we think will be beneficiaries of rising metals prices. Glencore offers a high level of diversification and massive global scale. Pan American offers more targeted exposure to precious metals that it mines. And Wheaton offers a different model to physical miners in that it is essentially a trading company that streams metals through purchase agreements. All three offer inflation exposure, and we think investors looking for an inflation hedge should consider these strong silver stocks. We're holding a Veterans Day Sale for our Action Alerts PLUS investment club . Get in on the conversation and get the latest investment ideas and trading strategies. For 48 hours, we're offering 30% off with this special sale. Click here and save $150.

Protect Your Portfolio With a Dividend Suit of Silver Armor

As prices rise, look to these three precious metal names.

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