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NewsMaterial3 min readDisconfirmAI Editorial

Man Group Portfolio Manager: Gold Miners Could Achieve Yields Close to US Treasuries Under a Variable Dividend Policy

Albert Chu, Natural Resources Portfolio Manager at Man Group, notes that the consensus dividend yield for six major gold mining companies is currently around 2.7%, significantly lower than the over 5% yield on 30-year US Treasury bonds. He calculates that if these companies universally adopted a variable dividend policy linked to free cash flow, the average yield could reach approximately 5% with a 50% payout ratio and approach 9% with a 90% payout ratio, assuming a gold price of $5,000 per ounce. However, he emphasizes that variable dividends fluctuate in tandem with gold prices, shrinking when prices fall, and that gold miner stocks exhibit higher volatility than gold itself.

2026-10-20 06:00 GMT+8

Gold pays no interest. This is its oldest structural defect as an asset class, and arguably its sharpest today—the yield on 30-year US Treasury bonds has exceeded 5%, making the opportunity cost of holding gold higher than ever. In a short piece titled 'What If Gold Had a Yield?' published on October 20, 2026, Albert Chu, Natural Resources Portfolio Manager at Man Group, poses a direct question: since gold itself generates no income, can the companies that mine it generate income on its behalf?

The starting point for the answer is the current status quo. Chu selected six large-cap gold miners—Kinross Gold, AngloGold Ashanti, Gold Fields, Barrick Mining, Newmont, and Agnico Eagle Mines—as a sample. Bloomberg consensus estimates show that the average dividend yield for these six companies over the next 12 months is approximately 2.7%, with individual yields ranging from 0.7% to 6.3%. While this level is not low, it remains significantly below the over-5% yield offered by Treasury bonds.

The gap stems primarily from dividend policies rather than profitability. Chu points out that the current payout methods among these companies vary widely: some pay only fixed quarterly dividends, resulting in a low but stable yield; others employ a combination of a fixed base dividend plus a variable component tied to free cash flow, causing the yield to fluctuate with gold prices. Most have not yet fully transitioned to the latter model.

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Profit margins provide the material basis for larger payouts. The industry's all-in sustaining costs (AISC) are approximately $1,700 to $1,800 per ounce, while gold prices currently trade just above $4,000 per ounce. This implies exceptionally high industry-wide profit margins. Chu estimates that at a gold price of $4,000 per ounce, the average free cash flow yield for these six companies is roughly 6%. Meanwhile, these companies carry very little debt, with most sitting in net cash positions. The scarcity of major new mine discoveries also limits the impulse to expand capital expenditures. Chu believes that if gold prices remain elevated, these companies will likely continue to accumulate cash, prompting management teams to revisit conservative dividend and capital allocation policies.

Chu conducted a scenario calculation: if these companies uniformly adopted a variable dividend policy based on a 50% free cash flow payout ratio, the average dividend yield could be pushed to nearly 5% under an assumption of $5,000 per ounce for gold, essentially par with Treasury yields. If the payout ratio were raised to 90%, the yield could approach 9%. He explicitly states that this is merely an illustrative example, not a prediction of actual policy changes.

However, the flip side is that variable dividends move in the same direction as gold prices. When gold prices fall, payouts shrink accordingly, lacking the certainty of a Treasury coupon. Furthermore, gold miner shares typically exhibit higher volatility than gold itself. Additionally, the dividend yields of some mining companies have actually declined since gold prices began rising in 2022—because dividends remained largely unchanged while share prices rose. Shareholder return policies are further differentiated by whether they are accompanied by share buyback programs.

Setting aside the yield disadvantage, Chu argues that gold's fundamentals remain strong, driven by structural rather than short-term forces. Supply continues to be constrained, and organic growth in mining remains difficult. Global money supply continues to expand, and geopolitical uncertainty keeps arriving in waves in the form of trade wars and armed conflicts. Central banks worldwide, particularly the People's Bank of China, are purchasing gold at record volumes. According to the World Gold Council’s annual central bank gold reserves survey, 89% of respondents expect global central bank gold reserves to rise over the next 12 months. The narrative surrounding de-dollarization and reserve diversification is also at unprecedented intensity.

Using gold for portfolio diversification has historically meant giving up income. When Treasury yields exceed 5%, this cost is higher than in the past. If more mining companies are willing to share their cash flows, this trade-off could be narrowed.

Sources

  • man.com↗
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