A gold royalty company invests in gold mines in exchange for future payments or for bargain-priced gold that it can sell for sizable profits. If you want to receive a portion of the royalty income, you can buy the stock of the royalty company. These companies typically pay out about 20 percent of the royalties as dividends to stockholders. To invest knowledgeably, you need to research the royalty companies, understand how they make money and consider the risks.
A typical gold royalty company will invest in 10 to 50 different mines at one time. The company pays the mine an upfront amount in exchange for either a percentage of sales or for the opportunity to buy gold from the mine at a deep discount -- an arrangement called a metal stream. These deals give the royalty company income that isn't affected by the costs that the gold mine experiences, reducing the risk of the investments. However, if the mine goes bankrupt or reduces production, the royalties will cease or decrease. Profits from metal stream deals may decline if the price of gold falls.
Research Before Buying
You can buy shares of gold royalty companies through a regular brokerage account. Morningstar, an advisory firm, listed 19 gold royalty stocks as of this article's publication date and offers investment advice on each. Prudent investors read the prospectus before buying stock in any company.
- Photo Credit Paul Katz/Photodisc/Getty Images
How to Buy Oil Company Royalties
Oil and gas royalties refer to land, an estate or an oil reserve a person or a business buys as an investment...
How to Invest in Oil & Gas
Crude oil and natural gas are two of the primary sources of energy. After refining, they provide fuel for cars and trucks...
How to Buy Shares in Mining Royalties
Mining royalties are a way of hopefully profiting from the mining industry without owning shares in a mining company that actually digs...
How to Invest In Gold Without Actually Buying Gold
Many people think that the only way to invest in gold is to buy physical gold in the form of gold bars,...
How to Calculate Royalties
Authors get paid in the form of royalties to write books. These book royalties can be confusing if the math behind them...
How to Get Royalties Checks
A royalty check is a payment that you receive on a perpetual basis due to some type of investment or activity from...
How to Make Money With the Stock Market and Royalty Trust Stocks
The two main ways to make money on the stock market are to sell stocks for more than their purchase price and...