Gold hit new all-time highs in 2025, and that has made it much more relevant to income investors. According to Statista, gold prices are up more than 50% through October 2025, marking the strongest annual gain since 1979, as the metal surpassed $4,000 per troy ounce amid ongoing geopolitical uncertainty and continued monetary easing by the US Federal Reserve. Forecasts for 2026 still point to gold averaging more than $4,000 an ounce, and some analysts believe it could approach $5,000 at some point this year.
As spot prices have risen, gold miner stocks have generally followed, and that has opened a window in which investors can realize both price gains and dividend income from profitable producers. Caledonia Mining Corporation (CMCL) is one of the names that fits that description.
It is a Zimbabwe-focused gold miner with an annual forward dividend of $0.56 per share and a yield of 2.11%, and also ranks as one of the best picks in bar diagramThe dividend stock screen, located in a part of the gold space where companies post positive profits while returning cash to shareholders.
But can a small-cap miner with a single analyst rating and relatively modest performance really deserve top billing in a dividend-focused portfolio by February 2026? Let’s find out.
Caledonia Mining is a smaller gold producer that operates primarily from its long-lived Blanket mine in Zimbabwe, and uses the steady production from that mine to support both dividends and its next stage of growth.
The stock has been a standout performer, up around 187% over the past 52 weeks, and is also up around 11% year-to-date (YTD) in the first part of 2026.
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Valuation still looks reasonable, with CMCL trading at about 8.5 times forward earnings compared to about 18.55 times for the broader materials sector.
When it comes to dividends, the story is also pretty simple. Caledonia has a term payment ratio of around 18.72%; It pays dividends quarterly and has now increased the dividend for a consecutive year. The stock’s 2.11% return isn’t far from the Materials sector’s average of 2.82%, and it sits on a business that generates about $183 million in annual sales and about $18 million in annual net income.
The latest production figures support this. FY2025 gold production at Blanket was 76,213 ounces, which was at the high end of guidance and was broadly in line with the previous two years. Fourth-quarter 2025 production was 17,367 ounces, down from 19,841 ounces in fourth-quarter 2024, primarily due to lower tonnages from higher-grade areas and power disruptions late in the quarter, issues that management is already resolving.
Milling performance remained strong, helping to soften the impact of pressure on grades and supporting the cash base that funds both dividends and growth.
Caledonia’s growth plan is very focused on specific projects, which makes sense for a small-cap dividend stock. The aim is to keep the dividend on track by generating more cash from its current Blanket Mine, while also spending heavily to become a multi-asset producer through Bilboes and Motapa.
For 2026, management has budgeted around $162.5 million in total group capital expenditure, with approximately $132 million reserved for the construction of Bilboes and $3.8 million for the exploration of Motapa. That spending is intended to move Bilboes from a development plan to a producing asset, while Motapa is the exploration angle that could extend growth beyond the construction of Bilboes.
With capex at that level, financing matters as much as the projects themselves, because weak financing can put pressure on dividends. In January 2026, Caledonia closed an expanded $150 million convertible senior notes offering, providing the company with significant long-term capital to pursue the Bilboes plan.
The company has also added a cash flow cushion through hedging. Caledonia has launched a gold hedging program by purchasing put options that set a floor price of $3,500 per ounce at about 3,000 ounces per month from January 2026 to December 2028. The idea is to support Blanket’s incoming cash during what should be Bilboes’ biggest spending period so that a weaker gold price doesn’t force tough decisions on shareholder returns.
Management is guiding Blanket Mine to produce between 72,000 and 76,500 ounces of gold this year. Production is expected to be stronger in the second half, as higher grade areas gradually enter the mining plan. That’s important because it targets better volumes and cash flow while increasing spending at Bilboes.
Regarding costs, Caledonia expects cash costs at mine of $1,500 to $1,700 per ounce sold and all-in sustaining costs of $2,100 to $2,300 per ounce sold. In other words, 2026 is not shaping up to be a cheap year to operate, but rather a year in which the company will take on higher costs and investments to support future production.
CMCL currently has a “Strong Buy” rating, based on analyst coverage. That single analyst’s average price target is $45, and versus the current price of $28.91, that implies an upside of around 56%.
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CMCL deserves a spot near the top of a dividend-focused buy list for February 2026, not because it has the highest yield, but because it combines real profitability, a low payout ratio, and a clearly funded growth agenda with a valuation that still looks conservative compared to its sector. The downside is that you are buying a miner heading into a year of heavy capex, so execution at Blanket and discipline around Bilboes are as important as the price of gold. If gold holds firm and the company achieves its production ramp-up in the second half, the path of least resistance for the stock will be higher, with volatility along the way. If costs soar or deadlines slip, stocks can cool even on a strong gold ribbon.
As of the date of publication, Ebube Jones had no (directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. This article was originally published on Barchart.com
