Northern Iron Ore AGM votes for 98% dividend payout

Northern Iron Ore (SGOK UK) shareholders, at an AGM yesterday, approved a dividend payout of 98% of net income (DPS of USD 0.33, dividend yield of 22%, as of yesterday’s closing price), in line with our expectations. The ex-dividend date was set in June 2012. Shareholders also voted for a significant deals item; shareholders that voted against it received a put option to sell their shares back to the company at USD 1.49/share (according to our estimates). The company also disclosed its 2011 financial results: revenue climbed 46% yoy to USD 1,835 mln, EBITDA increased 57% yoy to USD 1,175 mln (EBITDA margin of 64%), and net income more than doubled to USD 783 mln.

Roman Topolyuk: Unlike its affiliate company, Central Iron Ore, Northern Iron Ore set its ex-dividend date after expiration of the put option for shareholders who voted against significant deals, forcing those shareholders to choose between executing their put option and collecting dividends. Northern Iron Ore outperformed our financial projections: revenue by 3% and EBITDA by 13%. Despite lower iron ore prices in 2012, we estimate the company will maintain high profitability (EBITDA margin of more than 55%). We continue to view the stock as a long-term high dividend paying instrument.