Not Newmont. Not Barrick. This Gold Stock Collects Cash Without Running a Mine.

Mining gold stocks face high costs and complications, such as fluctuating prices for diesel fuel, heavy machinery, labor, and energy. Instability in governments where major gold mines are located can also lead to issues. Furthermore, a single strike or political conflict at a key site can significantly impact a company's earnings.

Gold streaming companies like Franco-Nevada (FNV) offer a solution, as they provide upfront funding to mining companies to build or expand a mine, receiving a percentage of the mine's revenue (royalty) or the right to purchase a portion of the mine's gold production at a discounted price (stream). Here are three reasons why Franco-Nevada's stock may be a preferable choice over traditional gold mining stocks:

1. Franco-Nevada enjoys top-line cash flow with exceptionally high profit margins and very low overhead. For instance, Barrick Mining (B) reported an adjusted EBITDA margin of 60% in the second quarter, while Newmont (NEM) had an adjusted EBITDA margin of around 61.2%. In contrast, Franco-Nevada reported an impressive adjusted EBITDA margin of 91.2%.

2. Franco-Nevada employs a small workforce, with only 41 full-time employees and five part-time contractors as of last year. Traditional mining companies, on the other hand, need hundreds or thousands of workers. By avoiding single-mine risk, Franco-Nevada has interests in 447 assets, including 129 operating mines. Its portfolio is also diverse, with 85% of its assets in precious metals, along with interests in natural gas liquids, oil, and gas.

3. Franco-Nevada benefits from the increase in gold, natural gas, and oil prices, as the company is profiting from all three. Over 80% of its revenue comes from royalty payments, while the remaining revenue comes from streaming payments. Although over 80% of its six-month revenue came from precious metals like gold, silver, and platinum group metals, it also generated $45 million from oil, gas, iron ore, natural gas liquids, and other mining assets.

During the first half of its fiscal year, nearly every financial category is a record, with six-month revenue of $1.23 billion, a 67% increase year-over-year. Operating cash flow reached $1 billion, an increase of 39% compared to the same period last year, and earnings per share (EPS) reached $4.27, up 80% year-over-year. This growth trend allows Franco-Nevada to continue raising its dividend, which has been increased for 19 consecutive years, including a 16% increase this year to $0.44 per share.

Despite the price of gold increasing by more than 105% over the past five years, Franco-Nevada's share price has risen by more than 8%, whereas Barrick's shares are down more than 15% this year, and Newmont's are up by a little more than 5%. Franco-Nevada's upside potential is lower compared to gold mining companies, but its downside is also more limited, making it an attractive investment option for those willing to hold the stock for the long term. Since its initial public offering in 2007, Franco-Nevada's total return is nearly 2,000%.