Is Labrador Iron Ore’s (TSE:LIF) Dividend Too Good to Be True?
Labrador Iron Ore Royalty Corporation (TSE: LIF) is a Canadian investment company that holds interests in Iron Ore Company of Canada (IOC), a leading North American producer and exporter of premium iron ore pellets and high-grade concentrate. LIORC holds a 15.10% equity interest in IOC and receives a 7% gross overriding royalty and a 10 cent per ton commission on all iron ore products produced, sold, and shipped by IOC.
Generally, LIORC pays cash dividends from its net income to the maximum extent possible, subject to the maintenance of appropriate levels of working capital. Since inception, the Company has paid out 99% of standardized cash flow.
Highlights:
High Dividend- Labrador Iron Ore Royalty Corporation has a consistent history of high dividend payout Company declared Cash Dividend for the Third Quarter of 2021 – $2.10 Per Common Share
Quick Look at Last 3 years Dividend Payouts
Management Changes- Aug. 16, 2021, Company announced the appointment of Mike McCann as President and Chief Executive Officer of IOC who is a highly experienced business leader with 30 years of operational experience in the mining and processing industry, effective September 20, 2021.
Skyrocketing Iron Ore Prices– The price of iron ore has skyrocketed in 2020 and 2021, and as a result so has LIORC’s dividend.
1 Year Chart
Quick Look at Company’s Numbers
Risk Factors:
The company will generate cash flow dependent on the sales generated from the IOC, and the sales generated from the IOC will be dependent on the price of iron ore, LIORC’s dividend will fluctuate significantly.
This is because during times of high iron ore prices, cash flows will be significant and more will be returned to shareholders. And as prices dip, cash flows will subsequently drop and less will be paid out. As a result, we get a dividend chart that looks like the one below.
Stock Recommendation: Considering the rising prices of Iron Core, consistent dividend payout & company’s increased revenue, MarketFacts gives a “Buy” rating on the stock at the closing Price of $34.90 as of October 5th, 2021.
| CMP (CAD) (5th October 2021) | $34.90 |
| Target Price (CAD) | $40.50 |
| Annual Dividend Yield | 10.50% |
| Recommendation | Buy |
