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Champion Iron Reports Earnings: Can It Maintain Its 5.9% Yield?
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Champion Iron Reports Earnings: Can It Maintain Its 5.9% Yield?

Story Highlights

Champion Iron reported earnings, which seem to have slightly disappointed investors. Can the company maintain its newly-issued dividend, which yields 5.9%?

Champion Iron (TSE: CIA) is engaged in the exploration and development of iron ore properties in Quebec, Canada. Like most basic material stocks, Champion Iron has performed well in 2022, with shares up 34% year-to-date. However, the stock is trading lower following its recent earnings report.

Revenue for the quarter ended in March decreased to C$331.4 million versus C$396.7 million. EBITDA was C$197.8 million, down from C$275.8 million for the same period in 2021. In addition, this also impacted earnings per share, as the figure dropped to C$0.23 versus $0.32.

The slowdown in financials was attributable to the decrease in iron production from 2,011,400 wet metric tonnes (wmt) to 1,869,000 wmt. However, the iron recovery rate remained relatively steady, as it slightly increased by 0.1% to 82.7%. In addition, the gross average realized selling price also fell 6% year-over-year while all-in sustaining costs increased 8%.

Dividend

For investors that like dividends, Champion Iron currently has a 5.9% dividend yield when annualized, which is above the sector average of 1.45%. The quarterly dividend of C$0.10 per share is currently well covered by earnings which were C$0.23 per share for the quarter.

Investors should note, however, that this quarterly dividend was the company’s inaugural dividend. As a result, there is no dividend history, as you can see in the image below, to compare the reliability of this figure.

In a cyclical industry such as basic materials, the dividend could easily disappear if the price of the underlying commodity falls too much.

Analyst Recommendations

Champion Iron has a Strong Buy consensus rating based on eight Buys assigned in the past three months. The average Champion Iron price target of $8.04 implies 18.9% upside potential.

Analyst price targets range from a low of C$7.50 per share to a high of C$8.75 per share.

Final Thoughts

Investors didn’t seem too impressed with the company’s earnings report as the stock traded lower on the news. Falling commodity prices and increasing costs aren’t exactly what investors want to see ideally. However, analysts remain positive on the stock as they expect almost 19% upside potential from here.

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