Introduction

In March 2020, the world was shutting down. Equity markets were in freefall. Commodity stocks were being sold indiscriminately. Nobody wanted to own a Ukrainian mining company.

Ferrexpo (LSE: FXPO) – a producer of high-quality iron ore pellets listed in London with operations in Ukraine – was being treated as if it might not survive. The dividend yield had risen to extraordinary levels simply because the share price had collapsed faster than the business had actually deteriorated.

TVISIL’s high-dividend yield screen flagged it. The position was opened. The result was a +195% total return including dividends.

What Is Ferrexpo?

Ferrexpo is one of the world’s largest producers of iron ore pellets, a higher-value form of iron ore used in blast furnaces and direct reduction processes to make steel. The company’s operations are based in central Ukraine, with its Yeristovo and Poltava mines producing tens of millions of tonnes per year.

The business is capital-intensive but generates strong cash flows when iron ore prices are healthy. Historically, management has returned a high proportion of those cash flows to shareholders via dividends – making Ferrexpo one of the more generous dividend payers in the London market during periods of commodity strength.

What the TVISIL Screen Found

TVISIL’s High Dividend Yield strategy looks for stocks where the dividend yield has risen to extraordinary levels, the balance sheet can sustain dividend payments even under stress, and the yield is high because the share price has fallen, not because the dividend has been inflated artificially.

Ferrexpo hit all three filters in March 2020:

Extraordinary yield at a depressed price: The combination of pandemic panic, commodity fear, and Ukraine country risk had pushed the share price to levels where the trailing dividend yield was exceptional. The market was effectively saying the dividend would be cut to zero – yet the business was still generating cash and management had a clear track record of paying through difficult periods.

Solid balance sheet: Ferrexpo carried manageable debt relative to its asset base and cash generation. The balance sheet was not perfect, but it was far from the distress the market was implying.

Price fall driven by sentiment, not fundamentals: Iron ore demand from China had not collapsed. The short-term disruption was real but not permanent. The market was pricing Ferrexpo as if the entire global steel industry was shutting down indefinitely.

The Outcome

From the 2020 entry to exit, Ferrexpo delivered approximately +195% total return, including dividends. The iron ore price recovered strongly through 2020 and 2021 as global stimulus programmes accelerated infrastructure spending. Ferrexpo’s cash flows improved dramatically, dividends were maintained and increased, and the share price re-rated sharply from its panic lows.

The Lesson

Ferrexpo illustrates the core logic of the High Dividend Yield strategy: when a fundamentally sound business is sold off to panic levels and the yield spikes to extraordinary levels, the risk-reward is usually strongly in the buyer’s favour. The key is to have a consistent framework that separates ‘yield spiked because sentiment is terrible’ from ‘yield spiked because the business is genuinely broken.’ TVISIL’s balance sheet filter is designed to do exactly that.

Want to Follow the TVISIL Process?

See every position in the TVISIL model portfolio – open, evaluating, and closed – with full return data at www.valueinvestingsage.com/pricing. Plans from $20 trial to $549/year Diamond.

TVISIL is an educational model portfolio and newsletter. Not personalised investment advice. All investing involves risk including permanent capital loss. Past performance does not guarantee future results.