Gold is on the move. Time to buy this cheap FTSE 100 dividend stock?

After being just about the only asset not to rally during 2021, the gold price has now started appreciating, due to concerns over inflation being less ‘transitory’ than first thought. Should this continue, I can think of one FTSE 100 stock I’d like to own. 

FTSE 100 inflation-beater

Polymetal International (LSE: POLY) might not be on the tip of many investors’ tongues. However, the company is one of the top 10 global gold producers in the world. It’s also among the top five silver producers.

Taking this sector hit into account, the £7bn-cap could prove a canny buy as investors become increasingly skittish over rising prices. Gold is, after all, traditionally seen as a way of protecting portfolios. It can’t be devalued in the same way as a currency. Its supply is limited too. 

But it’s not just inflation that makes me bullish on the outlook for gold. Covid-19 infection levels in some parts of the world, including the UK, are rising again. Many stocks, particularly those across the pond, are beginning to look priced to perfection. All this could force investors to seek solace in safe havens.

So how do the shares shape up?

As investors might expect from a company that produces a hitherto out-of-favour precious metal, POLY’s share price performance hasn’t been all that great. In fact, the stock’s 20% lower in value than it was 12 months ago.

However, tracking the stock’s movements for a single year doesn’t really tell me much. In fact, anyone holding POLY since 2016 will still have seen their capital grow by roughly 60%. This highlights to me the importance of judging performance over a suitably long period of time.

It’s also evidence that I don’t necessarily need to expose myself to volatile junior mining stocks to make good money from the sector.

Personally, I regard the downward trajectory of Polymetal shares as a buying opportunity. Right now, the stock can be snapped up for just 9 times forecast earnings. That looks a tempting valuation, given the consistently high margins the company posts. These could push higher if the gold price keeps rising. A PEG ratio (price-to-earnings growth) of just 0.5 also suggests new investors will be getting a lot of bang for their buck.

Buyer beware

Now you probably don’t need me to tell you that investing in a precious metals miner is can be a wild ride. It’s not just that mining for gold is tough and costly work. Companies like POLY also have no control over the price of the shiny stuff. Owning shares in a company operating in Russia and Kazakhstan also requires a certain mindset.

Having said this, I’d be partly compensated for this risk via dividends — something I wouldn’t receive from buying a fund that merely tracked the gold price. As things stand, analysts have the FTSE 100 company throwing off 98p per share in FY21. That’s a stonking yield of 6.9% at the current share price, covered 1.5 times by profit.  

Top of the stocks

Even if a full-on market crash doesn’t happen in the near future, having some exposure to a commodity whose price tends to be negatively correlated to equities may allow me to sleep more soundly at night.

Considering the value and income on offer, POLY would likely top my list of potential candidates to buy in this space.