New York, September 18 (FinanceEnquiry.com) – Analysts at JP Morgan downgrade their rating on the shares of Cliffs Natural Resources Inc (NYSE: CLF) from OVERWEIGHT to NEUTRAL. The 12-month target price has been reduced from $55.00 to $36.00.
In a research note published on September 17, the analysts mention that with a $36 target price of December 2013, shares of Cliffs Natural Resources are rated with a NEUTRAL rating. In addition to this, over and above the 8 percent appreciation that was supposed in the base case scenario from spot prices, CLF is pricing in the iron ore prices of coming year at present.
Furthermore, in order to maintain the current dividend yield of 5.5 percent and leaving a shortfall of $357 million, the current free cash flow estimate of 2013 is approximately break-even. Investors inquire that how long Cliffs Natural Resources would be able maintain the dividend and fund its growth CAPEX at Bloom Lake, due to this, the stock would probably come under pressure if prices of iron ore do not succeed to accelerate beyond the expectations.
In particular, so to completely fund the annual per share dividend of $2.50 from free cash flow of coming year, a seaborne price of $125 per tonne is required according to the calculation. Moreover, management of the company is expected to add better long term value by delivering on its operating aims at Bloom Lake and funding the expansion of Phase II, even though the dividend is obviously significant to investors and should be sustainable in the near term, the analysts add further.
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