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  5. LIF.UN: What is your current opinion on Labrador Iron Ore? [Labrador Iron Ore Royalty Corp]
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Q: What is your current opinion on Labrador Iron Ore? Would you continue to hold this stock or is it a sell? I have held it for 2 years and it has been a disappointment. Thanks John
Asked by John Orlebar on July 05, 2023
5i Research Answer:

LIF.UN owns a royalty interest in Iron Ore Company (IOC) – one of the largest iron ore producers in the world. The stock is now trading at 10x times' Forward P/E. The company’s results are dependent on the operation of IOC, which has been quite favourable in recent years, generating consistent, growing free cash flow, except in 2022, when revenue declined by around -15%. The balance sheet is strong, with no long-term debt. The majority of the cash flow generated is being paid out as dividends. Although the dividend yield fluctuates over the years depending on the operating results of IOC, the trend is quite positive over the long term. We think LIF.UN is quite cheap, trading at only 10x Forward P/E while offering a yield of 10%. Iron ore is of course cyclical, but we think the valuation reflects this. We would be OK holding for income.