Iron ore prices have been on a tear this year. And in line with that, I would expect that miners of this metal would benefit as a result. And some have, to be sure. But not this FTSE 250 stock. Ferrexpo (LSE: FXPO) has seen an awful turn in its fortunes this year. As 70% of the company’s mines are in war-torn Ukraine, it is not hard to understand why.
Dirt-cheap FTSE 250 stock
It is little surprise then, that between the last week of February and the first week of March, Ferrexpo’s share price more than halved. Its performance over the past year has been even worse. Its share price is down to a third of where it was this time in 2021. As a result of this, its market valuation is at an astounding low. I hold the stock in my portfolio and check on it from time to time. Even then, I had a jaw-drop moment today when I saw that its price-to-earnings (P/E) ratio is only 1.4 times.
Russia-Ukraine war impact
And I do not see that changing in the near future. The war is still very much on, with no signs of truce on the horizon. This is expected to keep Ferrexpo’s situation highly uncertain even though it has said that “Our operations and local communities are outside the main conflict zones within Ukraine, enabling us to continue our activities, including the delivery of iron ore pellets to customers in Europe via rail and barge, which have historically represented approximately 50% of sales”.
As an investor in the stock, it gives me some hope. But of course, I always need to be cognisant of the fact its problems could get far worse in the days and weeks to come. They may not, though. Realistically speaking, it is more likely than not, that at some point in the not too distant future, the company will in fact, resume operations. For that reason, I am still holding on to the stock. In any case, it has dropped so drastically since I first bought it that there is little left to even salvage now.
Massive dividend yield
As a result of the steep drop in share price, though, the company’s dividend yield is now huge, at almost 20% as I write. I reckon its dividends are due for cuts though, especially since its numbers will be impacted because of the war. Still, if its past dividends are anything to go by, I am hopeful that it might still earn me a big passive income in the future too.
All in all, Ferrexpo is not a stock without risks. But I do believe that its share price is so low right now, that it is a good buy in any case. If I had not bought it already, I would buy as much as I was willing to lose. It might just be a winning buy over the years.
