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Is Labrador Iron Ore’s (TSE:LIF) Dividend Too Good to Be True?

Financial independence and retiring early is a goal many Canadians dream about. More often than not, they get there through generating a passive income…

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This article was originally published by Stock Trades

Financial independence and retiring early is a goal many Canadians dream about. More often than not, they get there through generating a passive income stream via dividend stocks.

When seeking out these top Canadian dividend stocks, people often look for those that are providing better than average yields. The more you can yield on your money, the more passive income you generate and ultimately the quicker you can quit that 9 to 5.

But, a lot of companies are not as cut and dry as they seem, particularly ones that offer double digit yields, and investors can get into a lot of trouble not knowing exactly what they're purchasing. Its important that those seeking income know how to pick apart a company's dividend, especially those learning how to buy stocks, and even experienced investors.

Today we're going to be looking over a company with a complex income structure in Labrador Iron Ore Royalty Corporation (TSE:LIF), and why you might not want to bank on receiving its 10.88% yield moving forward.

So what exactly does Labrador Iron Ore (TSE:LIF) do?

Labrador Iron Ore Royalty Corporation, or LIORC as I'll refer to it from now on, is a royalty company that derives all of its revenue from its investment in the Iron Ore Company of Canada.

IOC is a leading North American producer and exporter of iron ore pellets. The company's operations are all located in Canada and it has a 24~ year expected mine life based on its current reserves.

Back to LIORC, it is structured in a way that its royalties are taken "off-the-top" which means the cash LIORC receives from IOC comes before expenses are deducted. A royalty compensation business model like this is similar to a company like the A&W Royalty Income Fund (AW.UN).

Also, much like a gold streamer like Franco Nevada (TSE:FNV), LIORC is not exposed to operating costs, and thus is strictly dependent on the price of iron ore and total sales generated by IOC.

Why does Labrador Iron Ore yield nearly 11% right now?

Because 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.

To provide more clarity on LIORC's dividend when it comes to the price of iron ore, here is a chart that shows its dividend when compared to the price of iron ore itself.

TSE:LIF vs Iron Ore

So as you can see, the price of iron ore has skyrocketed in 2020 and 2021, and as a result so has LIORC's dividend.

If you look at the history of the company's dividend (which you can find here) you'll notice one thing. The company pays a regular $0.250 dividend on a quarterly basis, and everything else is considered a special dividend up until the end of 2020.

Those special dividends are the result of excess cash flow because of rising prices. In fact, the company paid out more than 2.5X the income over the last 3 quarters than it did in all of 2018.

So, the company's dividend is likely to remain high as long as iron ore prices follow suit. But, if the commodity dips in price, LIORC's dividend will no doubt follow.

Recent price action will show you Labrador Iron Ore's reliance on commodity pricing.

If we look to the chart below, we can see that as the price of iron ore has started to flatline and even decrease, Labrador Iron Ore's share price has plummeted as a result.

TSE:LIF vs Iron Ore Spot Price

Much like a gold miner, an oil producer, or a copper miner, the company's share price is going to be susceptible to commodity prices.

This is something many investors are unaware of, and some simply chase the company for its excess yield.

The dip in price is not an indication of a poor company, although many will make this assumption if they bought at peak prices and iron ore continues to fall. It is simply the typical price action you would see out of a royalty company that bases its dividend solely off the royalties collected by a company who is impacted severely by the price of iron ore.

Overall, if you're investing in LIF, make sure you know what you're buying

TSE:LIF Dividend Yield

If we look to the dividend yield history of LIF, you can clearly see that it is anything but stable. We can see quick spikes or subsequent dips in yield. This is simply the release of special dividends based on cash flow.

So, although buying Labrador Iron Ore at todays prices gets you a near 11% yield, we have to understand that this is a TTM (trailing twelve month) yield, and is zero indication of what you will receive moving forward, unlike most typical equities.

If iron ore continues to fall in price, so will the company's distributions and ultimately its yield. So if you're looking for consistent reliable income, as you can tell by the chart above, this likely isn't the stock for you.

Today’s News

UEX Repays Loan From Denison

 

Saskatoon, Saskatchewan – TheNewswire – September 17, 2021 – UEX Corporation (TSX:UEX)  (OTC:UEXCF) (“UEX” or the “Company”) is pleased…

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Saskatoon, Saskatchewan – TheNewswire - September 17, 2021 – UEX Corporation (TSX:UEX)  (OTC:UEXCF) (“UEX” or the “Company”) is pleased to announce that the Company has repaid its outstanding term loan (the “Term Loan”) from Denison Mines Corp. (“Denison”).  The Term Loan was used by UEX to purchase JCU (Canada) Exploration Company, Limited (“JCU”), as more particularly described in UEX’s news release dated August 3, 2021.

 

UEX repaid the outstanding balance of C$20.45 million to Denison on September 17, 2021.   Previously, C$20.5 million of the Term Loan was repaid upon UEX transferring 50% of the JCU shares to Denison immediately following the closing of the JCU acquisition (see UEX’s news release dated August 3, 2021).  The shares of JCU owned by UEX that were pledged as security to Denison have been released to UEX.

 

About UEX

UEX is a Canadian uranium and cobalt exploration and development company involved in an exceptional portfolio of uranium projects. 

UEX’s directly-owned portfolio of projects is located in the eastern, western and northern perimeters of the Athabasca Basin, the world's richest uranium belt which in 2020 accounted for approximately 8.1% of the global primary uranium production.  In addition to advancing its uranium development projects through its ownership interest in JCU,  UEX is currently advancing several other uranium deposits in the Athabasca Basin which include the Paul Bay, Ken Pen and Ōrora deposits at the Christie Lake Project , the Kianna, Anne, Colette and 58B deposits at its currently 49.1%-owned Shea Creek Project, the Horseshoe and Raven deposits located on its 100%-owned Horseshoe-Raven Development Project and the West Bear Uranium Deposit located at its 100%-owned West Bear Project.

UEX is also 50:50 co-owner of JCU with Denison.  JCU’s portfolio of projects includes interests in some of Canada’s key future uranium development projects, notably a 30.099% interest in Cameco’s Millennium Uranium Development Project, a 10% interest in Denison Mines Wheeler River Project, and a 33.8123% interest in Orano Canada’s Kiggavik Project, located in the Thelon Basin in Nunavut, as well as minority interests in nine other grassroots uranium projects in the Athabasca Basin.

UEX is also leading the discovery of cobalt in Canada, with three cobalt-nickel exploration projects located in the Athabasca Basin of northern Saskatchewan, including the only primary cobalt deposit in Canada.  The 100% owned West Bear Project hosts the West Bear Cobalt-Nickel Deposit, the newly discovered Michael Lake Co-Ni Zone, and the West Bear Uranium Deposit.  UEX also owns 100% of two early-stage cobalt exploration projects, the Axis Lake and Key West Projects.

FOR FURTHER INFORMATION PLEASE CONTACT

Roger Lemaitre

President & CEO

(306) 979-3849

Forward-Looking Information

This news release contains statements that constitute "forward-looking information" for the purposes of Canadian securities laws. Such forward-looking information is based on a number of assumptions, which may prove to be incorrect. The actual results could differ materially from those anticipated in such forward-looking information as a result of the risk factors including: the timing and content of work programs; results of exploration activities of mineral properties; the interpretation of drilling results and other geological data; and general market and industry conditions. Many of these factors are beyond the control of UEX. Consequently, all forward-looking information contained in this news release is qualified by this cautionary statement and there can be no assurance that actual results or developments anticipated by UEX will be realized. For the reasons set forth above, investors should not place undue reliance on such forward-looking information. Except as required by applicable law, UEX disclaims any intention or obligation to update or revise forward-looking information, whether as a result of new information, future events or otherwise.

Copyright (c) 2021 TheNewswire - All rights reserved.

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Today’s News

American Manganese Files Final Prospectus and Amended Disclosure Documents

VANCOUVER, BC / ACCESSWIRE / September 17, 2021 / American Manganese Inc. (TSXV:AMY)(OTCQB:AMYZF)(FSE:2AM)("AMY" or the "Company") is pleased to announce…

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VANCOUVER, BC / ACCESSWIRE / September 17, 2021 / American Manganese Inc. (TSXV:AMY)(OTCQB:AMYZF)(FSE:2AM)("AMY" or the "Company") is pleased to announce that the Company has filed on SEDAR (www.sedar.com) its final short form base shelf prospectus and an amended technical report (the "Amended Technical Report") for its Rocher Deboule mineral property (the "Property"). The Company has also filed and an amended annual information form for the year ended July 31, 2020 (the "Amended AIF").

As a result of a prospectus review by the British Columbia Securities Commission, certain revisions were made to the technical report for the Property which was originally published on October 25, 2020. The Amended Technical Report contains no material differences to the original technical report for the Rocher Deboule Project. The Amended AIF incorporates the executive summary from the Amended Technical Report and is thus accordingly amended; it contains no material differences from the original annual information form filed on June 8, 2021.

About American Manganese Inc.

American Manganese Inc. is a critical metals company focused on the recycling of lithium-ion batteries with the RecycLiCo™ patented process. The RecycLiCo™ patented process was developed to offer a closed-loop and environmentally friendly solution for the recycling of cathode materials used in lithium-ion batteries. The recycling process provides high extraction and purity of cathode metals, such as lithium, cobalt, nickel, manganese, and aluminum. The RecycLiCo™ process was designed with the goal to produce recycled battery products that could be seamlessly and directly integrated into the re-manufacturing of battery cathodes using minimal processing steps.

For more information, please contact:
Larry W. Reaugh
President and Chief Executive Officer
Telephone: 778 574 4444
Email: lreaugh@amymn.com

www.americanmanganeseinc.com
www.recyclico.com

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release. This news release may contain "forward-looking statements", which are statements about the future based on current expectations or beliefs. For this purpose, statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements by their nature involve risks and uncertainties, and there can be no assurance that such statements will prove to be accurate or true. Investors should not place undue reliance on forward-looking statements. The Company does not undertake any obligation to update forward-looking statements except as required by law.

SOURCE: American Manganese Inc.



View source version on accesswire.com:
https://www.accesswire.com/664647/American-Manganese-Files-Final-Prospectus-and-Amended-Disclosure-Documents

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Today’s News

Erin Ventures Announces Proposed Private Placement

VICTORIA, BC / ACCESSWIRE / September 17, 2021 / Erin Ventures Inc. ("Erin" or the "Company") (TSXV:EV) announces that, subject to the approval of the…

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VICTORIA, BC / ACCESSWIRE / September 17, 2021 / Erin Ventures Inc. ("Erin" or the "Company") (TSXV:EV) announces that, subject to the approval of the TSX Venture Exchange (the "TSXV"), it intends to complete a private placement offering of up to 6,666,667 units of the Company ("Units") at a price of $0.075 per Unit for gross proceeds of approximately $500,000 (the "Offering").

Each Unit in this Offering will be comprised of one (1) common share in the capital of the Company (a "Share") and one (1) common share purchase warrant (each, a "Warrant"). Each Warrant will have a two (2) year term and will be exercisable into one (1) Share at a price of $0.10.

The Warrants also have an acceleration clause whereby if the Common Shares trade on the TSXV at a price equal or greater than the designated trigger price of $0.15 for more than ten (10) consecutive trading days during the Exercise Period, Erin shall have the right to give written notice to the holder requiring the holder to exercise the Warrant, in whole or in part, within a period of thirty (30) days from the date of receipt of notice from Erin.

The Common Shares and Warrants comprising the Units will be subject to a four-month and one day hold period in accordance with the policies of the TSXV and applicable securities legislation. The Private Placement remains subject to the approval of the TSXV.

The net proceeds from this financing will be used to fund further development of its wholly owned Piskanja boron project in Serbia, and for working capital purposes.

On behalf of the Board of Directors,
Blake Fallis, General Manager

About Erin Ventures
Erin Ventures Inc. is an international mineral exploration and development company with boron assets in Serbia. Headquartered in Victoria, B.C., Canada, Erin's shares are traded on the TSX Venture Exchange under the symbol "EV" and the OTCQB Venture Market under the symbol "ERVFF". For detailed information please see Erin's website at www.erinventures.com or the Company's filed documents at www.sedar.com.

For further information, please contact: 
Erin Ventures Inc. 
Blake Fallis, General Manager 
Phone: 1-250- 384-1999 or 1-888-289-3746
info@erinventures.com
www.erinventures.com

Erin's Public Quotations
Canada
TSX Venture: EV
USA
OTCQB: ERVFF
Europe
Berlin: EKV

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Forward Looking Statements:
This release contains forward looking statements. The words "believe," "expect," "feel," "plan," "anticipate," "project," "could," "should" and other similar expressions generally identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties including, without limitation, variations in estimated costs, the failure to discover or recover economic grades of minerals, and the inability to raise the funds necessary, changes in external market factors including commodity prices, and other risks and uncertainties. Actual results could differ materially from the results referred to in the forward-looking statements.

SOURCE: Erin Ventures Inc.



View source version on accesswire.com:
https://www.accesswire.com/664589/Erin-Ventures-Announces-Proposed-Private-Placement

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