A Basket of Goodies
04/26/2007 12:00 am EST
Here’s a great new way to achieve high profits with less risk in the natural resource sector. International Royalty Corporation (AMEX: ROY) is a global mineral royalty company based in Englewood, Colo., that collects 2%-3% royalties on net revenues from more than 60 mining operations around the world.
As a holding company that collects a small royalty on revenues rather than a large part of profits, IRC gives you the chance to profit from all the upside of commodities and new discoveries, but without the downside risk of running a mining operation or waiting for years for a mining operation to turn profitable. Royalties from the giant nickel deposit in Voisey’s Bay in Canada made IRC profitable last year and royalty revenues are estimated to rise to $35 million in 2007. IRC paid its first dividend, and although it was tiny, it is a good sign of things to come.
The stock has almost doubled since it started trading on the AMEX in late 2005. But its rapid earnings growth could cause it to double again. My friend Doug Casey says, “IRC may just turn out to be the next Franco-Nevada: management [under the direction of CEO Douglas B. Silver] has a goal of building its portfolio to something on the order of 500 to 1,000 royalties.”
My advice: Buy ROY and enjoy the royalties. (It traded at around $6.60 Thursday—Editor.)
Oneok Partners (NYSE: OKS), a natural gas pipeline, has shown impressive revenue growth and return on equity that is significantly higher than the industry average. It also has enjoyed notable net income growth. Oneok recently declared a quarterly dividend of 34 cents per share (payable May 14), which is unchanged from the previous quarter. Since January 2003, the company has increased its dividend ten times to mark an overall increase of 119% during that period. (It sold north of $69 Thursday—Editor.)
The National Association of Realtors reported this week that sales of existing homes plunged by 8.4% in March, compared to February. It was the biggest one-month decline since a 12.6%, one-month drop almost two decades ago in 1989. iStar Financial (NYSE: SFI) was down 1% on the news, but we still have a profit in this commercial real estate investment trust (REIT) that operates in two segments: lending and corporate tenant leasing. With its profit margins exceeding 30%, revenues have been rising—and so have the company's dividends. The dividend yield at iStar now is 6.9%. So far, the fundamentals have not been affected by the residential housing slump. (The stock changed hands at about $49 Thursday—Editor.)
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