Great Northern Iron Ore (GNI) shares were priced at $68.95 on the NYSE at the open on July 30, 2013. The trust will shut down April 6, 2015, with only eight more monthly dividends and a final payout in April 2015 to the remaining shareholders. The current dividend is $2.50 per share, per quarter. With eight quarters left, that would be $20.00 from the quarterly dividends plus the final payout.
Investors -- even speculators -- should be trading the stock in the teens. It is seriously overpriced, and investors are playing roulette with their money attempting to get the high dividend and still sell before the huge price drop. The final payout is subject to speculation at this time, but legal fees and costs of selling everything of value will cost money. The return is expected to be pennies on the dollar.
On the company website, its 2012 annual statement lists the income during 2012 at $24 million with net income at $20 million. With only 1.5 million shares, the net income per share was $13.33. This would sustain the $2.50 quarterly dividend. The annual report also listed the company assets at $19 million, and the final payout would only be another $12.66 per share on the final payout. None of these numbers support the $68.95 per share price today.
Investors have seen the price drop from near $120 per share in 2012 to $60 now. And it will continue to drop over the next two years. Those holding the stocks now did not receive $60 in dividends or any type of gains over the last year. They simply lost value in their investment.
Our recommendation is to sell today and stay away from the company. The stock price will continue to plummet faster than any dividend or gains an investor can capture. It is a loss of income investment. Only if the price dropped below $10 would there be a reason to buy in, but understand that after April 6, 2015, the trust shares have no value.
About the Trust
Great Northern Iron Ore Properties, a conventional nonvoting trust, owns and leases mineral and non-mineral properties on the Mesabi Iron Range in northeastern Minnesota. The company has a P/E ratio of 6.10. GNI has no debt to speak of, therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 2.93, which clearly demonstrates the ability to cover short-term cash needs. The gross profit margin is currently very high, coming in at 77.97%. Regardless of GNI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of gross profit margin, GNI's net profit margin of 77.96% significantly outperformed vs. the industry.
The change in net income from the same quarter one year ago has significantly exceeded that of the metals and mining industry average, but is less than that of the S&P 500. The net income has significantly decreased by 38.2% when compared to the same quarter one year ago, falling from $5.97 million to $3.69 million.
Expiration of the Trust, Spelled Out on the Company Website
The trust, by its terms, will dissolve on April 6, 2015 -- 20 years after the death of the last survivor named in the original Dec. 7, 1906, trust agreement. At the end of the trust on April 6, 2015, the certificates of beneficial interest (shares) in the trust will cease to trade on the NYSE, and thereafter will represent only the right to receive certain distributions payable to the certificate holders of record at the time of the termination of the trust. Upon termination, the trust is obligated to distribute ratably to these certificate holders the net monies (essentially, total assets less liabilities and properties) remaining in the hands of the trustees (after paying and providing for all expenses and obligations of the trust), plus the balance in the principal charges account (primarily representing the costs of surface lands acquired over the years).
After payment of this final distribution, the certificates of beneficial interest (shares) would be cancelled and have no further value. All other trust property (most notably the trust's mineral properties and the active leases) must be conveyed and transferred to the reversioner (currently Glacier Park Company, a wholly owned subsidiary of ConocoPhillips Company) under the terms of the trust agreement.
Disclaimer: I continually search for high-dividend stocks and recommend each investor carefully weigh the downside to stocks before buying. Conduct your research, beginning with the company website, and read about the trust before investing.