Labrador Iron Ore Royalty (LIF.TO)

There is a time to own these kinds of companies. You buy when they look expensive and you sell when they look cheap. One of the interesting things about the whole income trust era we went through, is that we wound up with a lot of companies and securities in Canada that were yield generating but actually had different kinds of characteristics. It allowed us to build income portfolios that aren’t hostage to interest rates. This was a recent purchase for him. It could be a good holding if materials continue to improve.

(A Top Pick July 28/15. Up 21.97%.) He was playing defence on these 3 stock picks, just looking for a way not to get creamed. The stock had a bounce and he sold into it. Dividend yield of 7%.

Thinks this has gone up so much recently because it had such a high yield before, and is just normalizing a little. It really depends on the throughput of iron ore and the royalties it receives. At current levels, he feels the dividend is fairly safe.

This gave a pretty big warning on April 27 when it broke the trend line. Base metals are going to be really impacted by what happens with the US$ and the Fed. Some of these you have to be really careful on and you want to buy them on the cheap.

(A Top Pick July 28/15. Up 2.38%.) These picks were based on survivability, not a growth. Sold his holdings last fall. This is a high-quality company and a great time to own it, plus you get the dividend.

The excess steel in China is the entire production of Japan for the next year. There is a spike here, but he is not sure you want to invest in this.

A tough one because volumes are declining with price, and of course there is a global glut of iron ore. Until that turns around, investors are not going to pay up for this company. Wouldn’t be overly concerned about the dividend, it is more a valuation on how you are going to make any money with other investors bidding the price up. Not any need to own this right now.

The story is very simple. They produce pellets which is a premium product. Not the lowest cost producer, but their production rates are in the middle. It’s a royalty, so there is no cost regarding operating exposure. However, you have to watch the price of iron ore. If iron ore turned up, this would be a screaming buy. They’re earning around $0.20 a quarter, but are paying $1, and have always paid specials out as they have earned premiums. The difficulty is if the iron price doesn’t start to move up a bit, the ability to pay special dividends is going to disappear, and then there is the question on how much they can pay on their quarterly dividends. Be patient on having this as a Buy.

Wouldn’t want to put his neck out on where iron ore prices are going to be in the next year or 2. He likes the business. They pay a dividend off the ore that they mine in Canada. Costs have been coming down. They sell a higher quality iron ore. However, with prices going against them, it is very, very difficult for them to keep on making more and more money to increase their dividend. There is a chance they could have to cut their dividend in future quarters. Sold his holdings when iron ore prices turned around.

Had a trading band that lasted for a number of years. It broke down, and now even the recent support seems to be breaking. It may be possibly driven by the overreaction by the market, and it may bounce off, but it doesn’t appear to be looking like much more than a short-term trade at this point.

The most important question on this company is the price of iron. The price of iron ore has collapsed. The predominance of this company’s production is iron ore pellets. The bad news is that we just have so much capacity and this is a smaller company. The good news is that the dividend looks pretty good. What concerns him about smaller cyclical companies is their ability to support the infrastructure around it. You have to start questioning how long a cyclical company can keep paying a dividend when commodity prices are low. That is his only concern.

China is making 800 million tons of steel a year, over 50% of the world’s production, but making it to sell to us. Nobody needs that much steel and they are trying to put our steel out of business. Iron ore has really come off and 30% of the world’s production is underwater, so production needs to be turned off. The commodity is now below the cost curve. The Cdn$ fixed costs knocks him onside. This company has no debt. They provide a high-quality product that has to go into steel mills in Europe. Dividend yield of 7.86%.

(Top Pick May 23/14, Down 38.13%) Iron ore prices went lower than anyone anticipated this year. We have seen the bottom now. The majority of its dividend is supported by royalty. The dividend is sustainable. 5.9%.

Because he is not a direct investor in resources, he asks that you take his comments with a grain of salt. Rio Tinto (RIO-N) is thinking about putting Labrador Iron Ore up for sale, as a consequence you might actually get a better lift on this royalty. He would be a little bit nervous about the dividends because the steel industry and steel suppliers are having a pretty rough time.

Actually doesn’t own anything. It has a royalty on iron ore produced and sold by the Iron Ore Company of Canada. Iron ore prices have been under siege and volumes have not been as good as they could be. This has a nice 8.5% dividend yield and eventually will come back. The Company has recently sent out a proxy wanting to change the status of the company. He would suggest that you vote against that.