Q: Could you please comment on LIF:CA, and do you think their quarterly dividend is safe?
How do you feel about iron ore in the next 3-5 years?
Would you hold this company for both the dividend and capital appreciation for the next 5 years?
How do you feel about iron ore in the next 3-5 years?
Would you hold this company for both the dividend and capital appreciation for the next 5 years?
5i Research Answer:
LIF's dividend varies with earnings, and just last week the dividend was cut by 12.5%. As a royalty company, it does not require much capital, and its fortune depends on iron ore prices and volume, exclusively. It has no debt and $18M cash, and essentially trades on its yield. Iron ore is tied to the global economy, and in particular China. Things are 'iffy' right now but we think with lower interest rates and lower currencies (US dollar) the sector is poised to do better over the 3 to 5 year term specified. We would consider LIF an 'ok, but higher risk' income stock. In up cycles, the dividend can appreciate quite nicely, and if one has patience they should be rewarded.