Turning $7,000 into strong income might sound like a tall order, especially in today’s market. But with the right stock, it’s actually possible to build both steady cash flow and long-term growth. Labrador Iron Ore Royalty (TSX: LIF) could be that stock. It pays generous dividends and has strong potential for capital appreciation. That combination makes it an ideal pick for a TFSA investment you can hold for decades.
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About LIF
The dividend stock doesn’t mine iron ore itself. Instead, it owns a royalty interest in the Iron Ore Company of Canada, which does all the hard work. Labrador Iron Ore simply collects a cut of the revenue. That makes it a lean operation with fewer costs and more reliable income, especially when demand for steel and raw materials remains strong.
Right now, the dividend stock trades around $28.65, with a market cap of about $1.8 billion. Its dividend yield sits at roughly 7.8%, thanks to a dividend of $2.25. At that price, a $7,000 investment would buy about 244 shares. That works out to about $550 in annual income. And since it’s in a TFSA, none of that income gets taxed.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| LIF | $28.66 | 244 | $2.00 | $549 | Quarterly | $6,995.04 |
Backed by strength
The dividends alone make a strong case for long-term holding, but the real magic comes from the growth potential. Labrador Iron Ore has been consistently profitable. Over the last year, it brought in around $187 million in revenue and earned $137 million in net income. Earnings per share (EPS) sit at $2.13, and the price-to-earnings ratio is around 13.5, which shows it’s not overpriced for what it delivers.
In its most recent earnings report, the dividend stock posted EPS of $0.93 for the quarter and increased the dividend by 7%. That kind of earnings strength supports continued dividend payments and makes it likely the share price will rise over time. If the company continues to grow earnings and raise dividends, investors could see capital gains on top of the income they’re already collecting.
It’s also worth noting that iron ore is a globally traded commodity. As demand rises in places like China and India, royalties collected by Labrador Iron Ore go up. Even moderate price increases in iron ore can lead to stronger earnings for the dividend stock, which often translates to a higher share price and increased dividend payouts.
Bottom line
Of course, no dividend stock is risk-free. Iron ore prices can be volatile, and a sharp decline could affect earnings. But Labrador Iron Ore doesn’t run the mines, which keeps its overhead low and margins high. It collects royalties and distributions, which creates a buffer when prices dip.
So, how do you turn this into income for decades? Simple. You invest $7,000 in your TFSA today and hold on. You collect dividends, completely tax-free. If you want, you can reinvest the dividends to buy more shares and boost your income even faster. Over time, the share price may climb as the business grows, which means your original investment could be worth a lot more later.
It’s a rare combo: income now, growth later, and stability throughout. In a world full of risky tech stocks and low-yield bonds, Labrador Iron Ore Royalty offers something refreshingly simple. If you want to build passive income that you can count on every single month, this stock is a smart way to start.
