Holding Canadian dividend stocks for decades can be a powerful wealth-building strategy. This is largely due to the compounding effect of reinvested dividends. When dividends are reinvested, the total return can be significantly higher. This long-term approach can lead to substantial capital appreciation and a growing income stream, making dividend stocks an attractive option for patient investors. So, let’s get into one superb dividend stock to get you some extra cash.
Labrador Iron Ore
Labrador Iron Ore Royalty (TSX: LIF) is a company listed on the TSX that focuses on, well, iron ore. Iron ore is a type of rock that contains iron, which is an essential material used to make steel. But LIORC doesn’t actually mine the iron ore itself. Instead, it owns a stake in a big iron ore mining company and earns money from royalties. These are payments based on how much iron ore is mined and sold.
Overall, LIORC is seen as a strong company because it benefits from the demand for steel. This is used in building everything from cars to bridges. As long as there is demand for steel, there will be demand for iron ore. And therefore LIORC will continue to earn money from its royalties. This makes it a compelling option for people looking to invest in companies that provide a steady income.
In the grand scheme of things, LIORC is a steady player in the market. They ride the wave of demand for steel, and as long as that wave keeps rolling, so do their earnings. For anyone looking for a reliable investment that doesn’t require constant attention, LIORC is like that dependable friend who’s always there when you need them.
Earnings to show for it
LIORC had an interesting second quarter in 2024. The company saw a nice boost in revenue. This was thanks to higher sales of iron ore pellets and a favourable exchange rate between the U.S. and Canadian dollars. However, not everything was smooth sailing. There was a bit of a drop in sales for their concentrate products, and the premiums they usually get for pellets were slightly lower than last year. Despite these ups and downs, LIORC managed to pull in $52.3 million in royalty revenue. This is a small bump up from the same time last year.
Earnings per share (EPS) for LIORC came in at $0.78 as well. This is a solid 20% increase over the second quarter of 2023. They also received a hefty dividend from the Iron Ore Company of Canada (IOC), their partner in crime, amounting to $41.5 million. This was more than double what they got in the same quarter last year. This shows that even with some challenges, LIORC is still bringing in strong returns for its shareholders.
The future unfolding
Looking ahead, there are some question marks, like the ongoing uncertainty in global steel demand and potential disruptions from wildfires. But overall, LIORC is holding steady. For investors, this means LIORC remains a reliable source of income, even when the market has its ups and downs. And now, the company’s stock price tends to be a bit more volatile than the average stock, with a beta of 1.10. This means it can go up or down more than the market as a whole, but it’s still a popular choice among investors.
One of the reasons LIORC stands out, though, is its strong profitability. The company keeps almost all of its profits, with a profit margin of 99.70%. This means that for every dollar they make, almost all of it ends up as profit. Investors also like LIORC because it pays out a lot of its earnings as dividends. Right now, the dividend yield is a high 9.78%, meaning for every $100 you invest, you could get $9.78 back each year in dividends.
Bottom line
Altogether, LIORC is also in good financial health, with $67.7 million in cash and no debt. This gives them a lot of flexibility to keep paying dividends and potentially invest in future opportunities. Their return on equity, a measure of how well they use shareholders’ money, is an impressive 31.89%, showing that they are making strong profits from the money investors have put in. Overall, LIORC is a reliable company with a strong track record of making money and rewarding its investors.
