The Rising Influence of Rising Affluence

[Democritus_of_Abdera]

Re: CLF Dividend ...

At $37.75, CLF has a current yield of 6.62%. The yield is even higher at the lower stock prices which have appeared off and on today...

I was somewhat concerned about CLF’s commitment to the dividend yesterday when it was not mentioned in their earnings press release (see #msg-77870977).

Several comments in today’s conference call convince me that the dividend will be sustained in line with Dew’s assessment (#msg-77872222). This reassurance was important to me, since I believe that the dividend will be a major factor in establishing a floor for the stock price (which has been falling relentlessly since April).

So, like Dew (#msg-77886122) I added to my CLF holdings in the mid $37 range..

Selected comments in the CC relevant to the dividend policy were:

Lauri Brlas, CFO In the prepared remarks:
During the quarter we also made our first payment of our meaningfully increased quarterly cash dividend of 52.5 cents per common share. With more than ample liquidity and a significant cash generation outlook, we're very confident in the sustainability of our impressive dividend rate. Based on our current outlook, we would expect to exit the year with no borrowings on our revolver and more than enough cash on the balance sheet to pay a full year of dividend.

In the Q&A:
(Q):
.... And if you can sort of prioritize <the Canadian chrome project> with respect to go or no-go on the project relative to debt pay down versus your dividend strategy as well too?
(A) Laura Brlas, CFO:
... absolutely we would prioritize the dividend first. If the market were such that pricing did not allow us to generate enough cash to do both the project and the dividend, the dividend would come first. And we will continue to keep our balance sheet at the investment grade profile that it is right now. Both of those would come ahead of investing in that project.

(Q) John Sullivan, Citi:
... I wonder if you could comment a bit on how you think about the dividend in various iron ore benchmark pricing?
(A) Laurie Brlas, CFO:
We’ve, as I said, a couple times, we've really pressure tested it and and believe that we can sustain this dividend under quite a few variations of pricing scenarios. There are a lot of things that, levers that we can pull as an organization. You may remember, in 2008 2009 we were generating cash. And so we can pull those levers if we need to and this was the commitment that we made to our shareholders that we would put above pretty much anything out.
(A) Joseph Carrabba, CEO:
That’s right. And you’ve got to take 2012 is a big transition year for us, particularly with the new assets up at Bloom Lake. And as soon as we get those costs and get that operation stabilized in Phase II, the construction piece coming over that, I think you can see very clearly there's plenty of room for the dividend. And again I will continue, as Laurie will, to reassure everybody, we didn't put this dividend on to take it off the table as things got tough. We've gone under a lot of different scenarios and we continue to maintain that we can support that dividend.