Dahlman Rose Restarts Coverage on Cliffs Natural Resources as a “Hold”; May Need to Tap Debt to Fund Dividend (CLF)
Coal and iron ore producer Cliffs Natural Resources Inc. ( CLF ) on Friday caught some tepid commentary from analysts at Dahlman Rose.
The firm resumed coverage on CLF with a "Hold" rating, citing weak iron ore prices and capital concerns. A Dahlman analyst commente, "We are assuming coverage of CLF with a Hold rating (from Buy previously) as we believe low iron ore prices and cash flow concerns will continue to pressure the shares…We believe the company will have difficult decisions to make over the next year concerning production and capital allocation."
Although the analyst believes CLF is committed to continuing its sizable dividend ($2.50 per share annualized / 6.5%+ yield), it expects a free cash flow deficit for 2013. As a result, the company may have to draw upon a revolving debt account (which currently has about $1.5 billion undrawn) in order to fund its payout.
Cliffs Natural Resources shares fell 35 cents, or -0.9%, in premarket trading Friday.
The Bottom Line
Shares of Cliffs Natural Resources ( CLF ) have a 6.54% dividend yield, based on last night's closing stock price of $$38.20. The stock has technical support in the $32-$34 price area. If the shares can firm up, we see overhead resistance around the $42-$45 price levels.
Cliffs Natural Resources Inc. ( CLF ) is not recommended at this time, holding a Dividend.com DARS™ Rating of 3.1 out of 5 stars.
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