If China were slowing -- and slowing so quickly -- why would the largest U.S. iron ore company put through a 123% dividend increase? Why would a company like Cliffs Natural Resources (CLF), one that has been through so many rough times, that has seen so many ups and downs, augment its payout so large that it would be risking the enterprise?
The answer, I think is pretty obvious: Whatever is happening in China right now will get better in the future, not worse. We are panicking the stock market in the U.S. over a statement from BHP Billiton (BHP) about Chinese "flattening." Meanwhile Joe Carrabba, the plain-speaking CEO of Cliffs, is seeing the bigger picture: the great secular rural-to-urban revolution that simply can't be stopped and must be fed -- with iron.
I called Joe and asked him to come on Mad Money because I was so thrilled about what his company had done. Cliffs -- whose stock that has provided a return second only to Apple (AAPL) in the last 10 years in the S&P 500 -- decided to allocate capital toward a dividend, and not a share buyback, as so many other CEOs would have chosen.
Ironically, the second-best returner bested the first-best, at least in my opinion, by putting its company in the top 10% of S&P dividend payers, even though its balance sheet isn't Apple-like by any means. Joe and his team just thought it would be right for all of the people who have stuck by the company in good and bad times.
I told him it would be sure easier to just do one of those buybacks, because that way he could slow it down when things got tough, but Joe thinks his business is just beginning to take off. He's been able to put together a string of acquisitions that give him a low-cost base, but high-quality ore that will make the payout relatively easy to make and to increase over time.
I found him a refreshing antidote to the hysteria that BHP unleashed on the market Tuesday.
Refreshing and, yes, certainly more lucrative.