Q: Could I get your opinion on LIF? I know the dividend fluctuates, but does it seem reasonably sustainable at current levels, what is the payout percentage, the debt levels, and what will drive the stock price higher or lower and the likelihood of each. The stock seems to have traded back down a bit recently - would you consider buying at the current level for an income oriented investor?
Thank-you
Thank-you
5i Research Answer:
LIF is a highly cyclical business and its valuation at 10.2x forward earnings reflect that. The stock will move higher/lower as iron ore prices and volumes change. LIF has no debt. For fiscal year 2023, LIF paid out dividends of 1.17x free cash flows and in the most recen quarter it paid out 0.96x free cash flow. Payout ratio from earnings over the last twelve months was 81%. The dividend will fluctuate based off earnigs and industry cyclicality. We are fine owning it as a higher risk income investment, however, one must be patient here due to the fluctuating dividends.