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  5. LIF: Great yield on this one, although I believe it's more variable than most. [Labrador Iron Ore Royalty Corporation]
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Q: Great yield on this one, although I believe it's more variable than most. Would you consider this security too volatile for pensioner on fixed income with otherwise diversified portfolio?
Asked by Tony on October 26, 2023
5i Research Answer:

LIF.UN owns a 15.1% royalty interest in Iron Ore Company (IOC) – one of the largest iron ore producers in the world. The industry is quite cyclical, and the dividend does vary. 

Although the dividend payment fluctuates over the years depending on the operating results of IOC, the trend has been positive over the long term. Dividend growth was around 11% annualized over the last ten years on average.
We think LIF.UN is quite cheap, trading at only 10.4x Forward P/E while offering a yield of 9%. However, given its cyclicality in its operation and dividend payment, investors need to size it conservatively. We would be OK owning it as part of a diversified income portfolio. Assuming income is enough that the capital in the portfolio is not likely to be needed.