Three Reasons for Rising Dividend-paying Uranium Investments Highlighted
By: Paul Dykewicz,
Three reasons for rising dividend-paying uranium investments include the price of the naturally occurring radioactive element has soared to more than $60 per pound in early September, ascending for an eighth straight week.
Even though uranium prices had not reached that level since last April, two other key reasons stem from persistent supply risks and growing long-term demand as governments around the world look to pursue so-called “clean energy” alternatives to fossil fuels such as gasoline, diesel oil and coal.
In the United States, the climate-conscious provisions were included in the Inflation Reduction Act championed by the Biden administration when it became law during August 2022.
EWTN News Anchor Tracy Sabol interviews Paul Dykewicz.
I side-stepped partisan politics when commenting recently on EWTN to focus on how rising mortgage rates, persistent inflation and climbing food prices do not back President Biden’s boasts about the benefits of the Inflation Reduction Act. Despite giving the new law a name that suggests it will battle inflation, prices instead have risen for housing and many other expenses that fall especially heavily upon those of modest means.
The legislation’s true aim may have been signaled about a year ago on August 16, 2022, when the White House announced the new law one of the “most significant” acts Congress has taken on clean energy and climate change in the nation’s history. That law is just one more reason uranium is gaining interest as the fuelr source for nuclear energy.
Three Reasons for Rising Dividend-paying Uranium Investments: Clean Energy Thrust
In August 2022, the White House released a statement claiming President Biden redefined American leadership to confront an “existential threat” to the climate and set forth a new era of innovation and ingenuity to cut consumer costs and boost the global clean energy economy. But the latest Consumer Price Index shows prices keep rising.
In July, the Consumer Price Index (CPI) for All Urban Consumers rose 0.2%, seasonally adjusted, and 3.2% over the last 12 months when not seasonally adjusted. The index for all items — less food and energy — increased 0.2% in July when seasonally adjusted, up 4.7% for the past year when not seasonally adjusted, the U.S. Bureau of Labor Statistics reported. The CPI measures average change over time for the prices paid by urban consumers for a market basket of consumer goods and services.
“The Fed’s tight money policy is having its effect,” wrote Mark Skousen, Ph.D., in his latest Forecast & Strategies investment newsletter hotline. “Interest rates are rising sharply, with the yield on the benchmark 10-year Treasury topping 4.25%, the highest it has been in 15 years. And the 30-year mortgage rate is now over 7%.”
The most recent rates show 30-year mortgage rates now at or above 8%.
Mark Skousen, Forecasts Strategies head and Ben Franklin scion, meets Paul Dykewicz.
Three Reasons for Dividend-paying Uranium Investments: Supply Risks
“We don’t want Treasury yields to collapse, as that’d signal a hard economic landing,” said Jim Woods, leader of the Intelligence Report investment newsletter. But a drift lower, especially in the 10-year Treasury Note, would help support the market multiple and make the argument for a 20X valuation (up from the current 19X) more viable.”
Investors are close paying attention to Fed Chairman Powell’s comments about future interest rates, especially during speaking engagements. He fortunately did not set off alarms when speaking at the Jackson Hole Economic Policy Symposium late August.
Three Reasons for Rising Dividend-paying Uranium Investments: Growing Demand
One way for investors to pursue profits is through nuclear power equities, Skousen said. Nuclear fission is nearly 8,000 times more efficient at producing energy than traditional fossil fuels or even solar, water and wind power, he added.
The construction of average U.S. nuclear power plants required 40 metric tons of steel and 190 cubic meters of concrete per average megawatt of electricity generating capacity, Skousen commented. Compare that to a typical wind-energy system, which requires construction inputs of 460 metric tons of steel and 870 cubic meters of concrete, he added.
Three Reasons for Dividend-paying Uranium Investments Aided by Income
Canada’s Cameco Corporation (NYSE: CCJ) pays a small dividend, but it also offers an opportunity for capital appreciation as a clean energy stock. The company paid a dividend of $0.089 last Nov. 29. It does not offer much of a yield but many checking accounts don’t either. Cameco also may be able to raise its dividend in the future.
Skousen has recommended Cameco in the past and recently added it to his Fast Money Alert portfolio. He recently chose a different stock with a lower price-to-earnings (P/E) ratio that is a current recommendation in his TNT Trader service. The latter stock is up more than 36% since he advised his subscribers to buy it in June 2023. That one does not pay a dividend but Skousen wrote to his TNT Trader subscribers further gains would not surprise him.
Chart courtesy of www.stockcharts.com.
“The Russian conflict is going to bolster the case for continuing nuclear energy output at current levels with existing facilities,” said Jim Woods, who heads the Successful Investing and Intelligence Report investment newsletters, as well as premium trading services such as High Velocity Options.
“There is also a good chance that several nations take additional steps to enhance their energy security using this established method,” Woods continued. “Those factors enhance the appeal of global stocks engaged in the discovery and production of nuclear components.”
Woods’ preferred vehicle to participate in this sector is the Global X Uranium ETF (NYSEARCA: URA). The diversified ETF seeks to provide investors access to a range of companies engaged in uranium mining and the production of nuclear components, including extraction, refining, exploration or manufacturing equipment for the uranium and nuclear industries, he added.
Chart courtesy of www.stockcharts.com.
The stock paid a small dividend of $0.049 on December 29, 2022. Dividend payments never are guaranteed but another payout was provided by the company late this year, too.
Paul Dykewicz interviews Jim Woods, who heads Intelligence Report.
Three Reasons for Dividend-paying Uranium Investments: Biden’s Backing
The White House guidebook for the Inflation Reduction Act provides a detailed overview of the clean energy and climate mitigation, agriculture, and conservation-related investment programs. It further identifies eligibility to apply for funding and for what activities. A quick glance at the guidebook shows an emphasis on government funding of projects, not ways to curb inflation, stem price increases and stop runaway mortgage rates.
Bob Carlson, a pension fund chairman who also heads the Retirement Watch investment newsletter, said he prefers to invest in uranium through iShares MSCI Global Metals and Mining Producers (PICK). Carlson drew my attention to the exchange-traded fund (ETF) last fall and it has advanced by double-digit percentages.
“I was attracted to this ETF even before the invasion of Ukraine,” Carlson told me. “The mining companies had gone through a long bear market. They worked to reduce debt and otherwise clean up their balance sheets. Their more efficient operations mean most of them can profit at relatively low prices for their commodities and will earn strong profits as prices rise.”
Retirement Watch leader Bob Carlson meets with Paul Dykewicz.
Michelle Connell, who heads Dallas-based Portia Capital Management, commented that she prefers to invest in PICK rather than individual uranium companies. One reason is most of the stocks held in PICK are profitable, while having positive revenue growth and book value. PICK also has shown superior long-term performance versus gold and silver ETFs by outperforming the precious metals on a total return basis for one year, three years and five years, Connell said.
Chart courtesy of www.stockcharts.com.
“Maybe this is a better way to hedge for inflation than a gold ETF,” Connell said.
One point of caution is that PICK is market-cap-weighted, with its top 10 stock holdings comprising more than 50% of the ETF’s portfolio, so underperformance by one of those key positions could crimp the fund’s returns, Connell continued.
Freeport-McMorran (NYSE: FCX), of Phoenix, Arizona, ranks near the top of the ETF’s biggest positions. The company owns copper mines worldwide. Copper is in short supply and is used in many manufacturing processes, including green technology and electric vehicles, Connell continued.
Michelle Connell heads Dallas-based Portia Capital Management,
Three Reasons for Rising Dividend-paying Uranium Investments Fueled by Cost-Effectiveness
Former Republican presidential candidate and media mogul Steve Forbes, who I interviewed last month at the FreedomFest conference, recently said the “green energy” projects funded by President Biden are “expensive” and “not good for the environment.” Especially for those who are skeptical of his views, you can click this video link to hear his reasoning.
Mortgage rates in the United States are at a level not seen in over 20 years, a stark difference from a couple of years ago when families were refinancing to lock in low rates, according to a recent note from BofA Global Research. In the United States, refinancing rose to $2.6 trillion in 2020-2021 when the Fed lowered interest rates to zero. The number of U.S. homeowners without a mortgage today is near 40% and among those who aren’t so lucky, 85% are on a fixed-rate mortgage.
Wind farms are located between Middelfart – Kaslunde, southern Denmark. Photos by Paul Dykewicz.
“For these households, the debt burden remains unchanged during a hiking cycle, only impacting those with either a floating rate mortgage or a home purchased after rates went up,” BofA wrote. “This makes the Fed’s policy tool somewhat of a blunt instrument, potentially requiring higher rates and/or holding rates higher for longer. However, the other side of the coin of a less powerful monetary policy is that consumer spending seems resilient on the back of strong employment and a tight housing market.”
Forbes accused the Biden administration of spending hundreds of billions of dollars on “schemes” to replace fossil fuels with renewable energy sources. For instance, Forbes said one wind turbine requires the use of 2,500 tons of concrete that goes 30 feet deep into the ground.
“Imagine trying to reclaim that land,” Forbes said.
Three Reasons for Rising Uranium Investments Aided by Wind Power Limits
The wind turbine also requires 900 tons of steel and 45 tons of unrecyclable plastic, Forbes continued. To operate the wind turbine, it requires 700 gallons of costly synthetic lubricants that are vulnerable to spills since they must be replaced each year, he added.
Wind farms dot the landscape between Frankfurt and Cologne, Germany. Photos by Paul Dykewicz
Solar and wind farms need “gargantuan” amounts of land, Forbes said. For example, New York City occupies 205,000 acres of land, but it would require 2,000,000 acres of land to fuel the Big Apple solely with renewable energy, he explained.
A 100-megawatt gas-fired turbine is about the size of a residential house and would provide electricity for 75,000 homes, Forbes counseled. To give equivalent energy to the same number of homes, 20 wind turbines would occupy 10 square miles of land.
“Renewables are very expensive,” Forbes continued. “Cost overruns here are as common as they are at the Pentagon.”
Wind farms are “notorious bird killers,” degrade existing transmission lines and displace wildlife, Forbes warned. Plus, what should be done with the 1,000-pound batteries in electric vehicles that require replacement with no recycling of the worn-out ones? he asked rhetorically.
Renewables also require an immense amount of mining for minerals. To replace fossil fuels, a 40-fold increase would be required in lithium, Forbes said.
These matters warrant substantive discussion and analysis, Forbes advised. Without it, the result will be bad environmental results and record-breaking waste of federal money, he added.
Three reasons for dividend-paying uranium investments are worth keeping in mind amid high inflation, rising mortgage rates and increasing prices. Investors also should weigh the rising political risk due to Russia’s unrelenting war in Ukraine, a formidable counteroffensive and the recent apparent assassination of Wagner mercenary leader Yevgeny Prigozhin in a plane crash. Despite those risks, uranium keeps rising.
Paul Dykewicz, www.pauldykewicz.com, is an award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal of Commerce, Crain Communications, Seeking Alpha, Guru Focus and other publications and websites. Paul can be followed on Twitter @PaulDykewicz, and is the editor and a columnist at StockInvestor.com and DividendInvestor.com. He also serves as editorial director of Eagle Financial Publications in Washington, D.C. In that role, he edits monthly investment newsletters, time-sensitive trading alerts, free weekly e-letters and other reports. Previously, Paul served as business editor and a columnist at Baltimore’s Daily Record newspaper and as a reporter at the Baltimore Business Journal. Plus, Paul is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The uplifting book is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many other sports figures. To buy signed and specially dedicated copies, call 202-677-4457.