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This year, energy stocks gained in the first half as the Iran war created an energy shockwave like that of the February 2022 Russia-Ukraine war. Taking a leaf from the past, gold mining stocks surged from July 2022 to March 2023 even when the US Fed increased interest rates. The history could repeat itself, and this 5.3% yielding dividend stock could surge 80–100% in the second half of 2026 and the first half of 2027.
The stock is Lundin Gold (TSX:LUG), a Canadian gold mining company that has the lowest all-in sustaining cost (AISC).
Source: Getty Images
Why could the dividend stock soar in 2026?
What makes me confident about Lundin Gold stock is the nature of gold and how it reacts to interest rates and the dollar’s strength. Generally, the gold price rises when the interest rate falls. But after the Russia-Ukraine war spiked oil prices to US$125/barrel and the United States froze Russia’s US$300 billion worth of assets, gold demand surged. Central banks worldwide started buying gold to diversify their reserves and reduce concentration risk. Since then, central banks have been on a gold-buying spree. The reduced confidence in the dollar sent gold prices up between July 2022 and March 2023, even when interest rates fell.
The gold price has dipped once again as all the reserves are going into the Iran war and securing safe passage for oil. Once the situation settles, either through alternate supply sources or a reduction in oil demand, global central banks could once again resume gold buying.
Could gold resolve the US fiscal deficit?
The rising gold prices could work in the favour of the United States, which owns the world’s largest gold reserves. The country’s massive US$30 trillion plus fiscal deficit and US$1 trillion in annual interest have been a major cause of concern. However, the US government has its gold reserves valued at a 1973 rate of $42.22 per troy ounce.
There is active discussion on revaluing the reserve at the current market rate of approximately $5,000 per ounce. The Federal Reserve has also published a research report titled “Official Reserve Revaluations: The International Experience,” published on August 1, 2025. A valuation change could create an unrealized gain and significantly reduce the US fiscal deficit.
Why buy this 5.3% yielding dividend stock now?
Fear boosts the gold price and pulls down the stock market. Stocks like Lundin Gold stand at the intersection of the two. Their gold inventory gives you exposure to gold price momentum as their share price rises alongside the gold price. Being in the mining business, they can sell their inventory at a higher market price even when the cost remains low.
The surplus cash flow from selling gold at a higher price is redistributed to investors in the form of a special dividend. Lundin Gold’s dividend policy states that 50% of the surplus free cash flow left after allocating US$300 million for fixed dividends will be paid as a variable dividend. The fixed quarterly dividend per share is $0.30, and the company declared a dividend of $1.15 per share in the first quarter of 2026. This was possible because its average realized gold price of US$4,951/oz sold was way higher than its AISC of $1,114/oz sold.
Now is a good time to buy the stock, as the variable dividend component could earn you more than just a 5.3% yield. Moreover, the increase in gold price could drive the stock price up. Right now, Lundin Gold’s stock has fallen 28% from its February 2026 peak of $130.98. Recovering to its previous peak could drive the stock price up 39%. Any new gold price rally could push the share price to a new high. An 80–100% rally seems realistic.
