Iron curtain

The silver lining in the ongoing war for Ferrexpo is that it’s located in central Ukraine. Despite being stationed east of the Dnieper River, Ferrexpo’s facilities haven’t suffered any direct damage from Russian forces, allowing it to continue running its operations.

Having said that, logistical disruptions have impacted the company’s exports. In its most recent operations update, Ferrexpo mentioned that it decreased its commercial production. Ukraine’s Black Sea ports remain closed due to Russian presence in the south. As a result, the FTSE 250 firm has had to divert all its European shipments via Ukraine’s railway network and barging operations.

However, recent Russian airstrikes have damaged Ukraine’s railway and infrastructure in the south west. This has reduced Ferrexpo’s ability to utilise its barging operations to serve its European customers. Nevertheless, the group is in advanced discussions with additional port operators in central Europe for seaborne exports.

As flexible as wrought iron

Due to supply chain disruptions, the iron pellet producer reported a 0.4m tonne increase in iron ore inventories in May. Although the downturn in production hasn’t resonated well with shareholders, I believe this to be a masterclass in operating efficiency, as Ferrexpo is protecting its bottom line from unnecessary costs.

Management have also reiterated that production is expected to resume at peak capacity once damaged infrastructure is reopened, an alternative logistics route is agreed, and Ukraine’s Black Sea ports resume activities.

On track to £3.30?

I have no doubt that Ferrexpo has a long and treacherous road ahead. Analysts have set a price target of £3.30, but the firm faces strong political and economic headwinds. Apart from the ongoing war, a recession in Europe and America is within the realms of possibility. If this were to happen, it would negatively impact industrial production, affecting Ferrexpo’s top line.

On the flip side, there are also a couple of catalysts that could send the FTSE 250 stock flying. Firstly, the firm sees excess demand from Europe after countries imposed sanctions on Russia. Considering Europe accounted for more than half of Ferrexpo’s revenue in 2021, this could be a huge tailwind for Ferrexpo once it resolves its logistical issues. Secondly, iron ore prices could increase if China’s economy continues its recovery. With the group’s Wave 1 Expansion also on hold, its ability to produce 25% more pellets could boost Ferrexpo’s numbers if there’s sufficient demand.

Furthermore, the board recently reinstated its dividend, attracting dividend investors back into the stock. Its shares are going ex-dividend later this week at 6.60p per share. So, this could be an opportunity for me to earn some passive income.

Nonetheless, despite a potential 115% return, the geopolitical implications remain too ambiguous for me to have a long-term position in Ferrexpo. Instead, I’ll be looking to purchase other shares that could benefit my portfolio in this stock market crash.

The post Can this FTSE 250 income stock make me rich? appeared first on The Twelfth Magpie.

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John Choong has no position in any of the shares mentioned at the time of writing. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

An unfashionable stock

boohoo (LSE: BOO) is one of the UK’s biggest fashion retailers. The online fashion retailer had already been 30% down this year, but plunged a further 12% after it released its FY22 results. Nonetheless, it’s managed to recover most of its post-earnings loss since then.

The firm had already been starting to see a slowdown in sales growth due to “Significantly longer customer delivery times as a result of the pandemic”. Nevertheless, its new distribution centre in the US is expected to go live in mid-2023. With next day and two-day express delivery options available, this could help ease the supply chain constraints that boohoo is currently facing, and help the stock price.

However, with inflation continuing to weigh on consumer spending, I expect sales growth to continue declining. Management shares my sentiment too, as guidance for FY23 is for low-digit revenue growth. Expensive freight costs have also impacted its bottom line as the firm saw its profit margin decline from 5.2% in FY21 to -0.2% in FY22. For that reason, I won’t be buying this stock for now.

In the eye of the storm

The unfortunate events of the Russia-Ukraine skirmish has battered the Ferrexpo (LSE: FXPO) share price. Commonly known for being a high-dividend yield stock, the stock is now trading at 65% off its all-time-high.

The Ukraine-focused firm faces a large amount of uncertainty given the ongoing war there. Any further escalation might run the company out of business as its mining operations are located just east of Kyiv, where it’s more susceptible to Russian attacks. Additionally, China’s city-wide lockdowns have driven iron ore prices down. This will inevitably impact Ferrexpo’s top line in the near to medium term. Most importantly, the firm decided to defer its dividend payments. The board said that it will continue to assess the situation in Ukraine and make a decision on dividends when appropriate. With many investors initially buying the stock for its dividend, this is a stock I’m avoiding.

Getting the boot

Aside from sky-high inflation, Dr Martens (LSE: DOCS) will also have to worry about the recent retail sales figures. Although positive for the month of April itself, retail sales for the three months to April fell 0.3% as high inflation hurt purchasing power. That’s one reason why its stock is down 50% this year.

The majority of the firm’s revenue stems from the Americas and EMEA region. With inflation continuing to spiral out of control, this doesn’t bode well for Dr Martens’ near-term outlook. As central banks in these regions rush to raise interest rates, its debt levels start to become even more alarming. The firm has a debt-to-equity ratio of 140%, a declining free cash flow, and higher operating expenditure. These aren’t factors that are favourable when I invest in UK stocks, especially in a high interest rate environment. As such, I’ll be looking to purchase other shares with much more favourable fundamentals.

The post 3 UK stocks to avoid this summer appeared first on The Twelfth Magpie.

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John Choong has no position in any of the shares mentioned at the time of writing. The Motley Fool UK has recommended boohoo group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Mining its business

When in times of uncertainty, it always help when companies have solid fundamentals. Thankfully, Ferrexpo’s financials look great. With a 0.8% debt-to-equity ratio, decent levels of cash and equivalents, as well as heavy assets, I believe Ferrexpo is in a good financial position to withstand the current economic and political hardships.

Furthermore, the firm boasts an extraordinary profit margin of 46% in its most recent earnings report, showing good quality earnings. This allows the company to pay a generous annual dividend of £0.43 per share. Nonetheless, I attribute this to the spike in iron ore prices in recent times.

Ferrexpo troubles

Despite the iron ore exporter’s solid fundamentals, I see its revenue stream remaining choppy in the short-to-medium term. There are several reasons for this. I worry that Ferrexpo might not be able to continue its mining operations at optimal levels. This would limit potential revenue, as its latest trading update cited an 11% decline in production from the previous quarter. Additionally, it faces logistical issues with almost half of its products sitting in inventory. This is due to the closure of the Pivdennyi port in south west Ukraine. Having said that, management is “reviewing alternative methods of delivering products to seaborne markets.”

Until these logistical issues can be resolved, Ferrexpo’s outlook remains uncertain. I expect revenue to take a hit for the foreseeable future. This could in turn affect the firm’s future dividend payments. On top of that, Ferrexpo normally declares a dividend in March, but it is yet to do so this year. Hence, dividend investors are steering clear for now, despite its attractive yield.

Ironing things out

There were silver linings from its latest trading update though. Firstly, Ferrexpo is still running its operations, provided that it’s safe to do so. This comes as a bit of a relief to me because its operations are located outside the main conflict zones. Secondly, the delivery of pellets to customers in Europe has also resumed via rail and barge. These customers have historically represented approximately 50% of its revenue. This should give investors some hope that the dividend giant can resume payments soon. Finally, with iron ore prices currently trading at $145 a tonne, this should push the company’s margins higher.

Nevertheless, I think this cheap dividend stock still remains a high risk one to invest in. Although the firm has historically declared a dividend in April, I do not see it happening this time due to the current climate. So with all that in mind, I will not be buying Ferrexpo shares for my portfolio.

The post Can this cheap dividend stock help me beat inflation with an 18% yield? appeared first on The Twelfth Magpie.

More reading

• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?

John Choong has no position in any of the shares mentioned at the time of writing. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.