The Dividend Stock I’d Buy for RRSP Season

Registered Retirement Savings Plan (RRSP) season turns “maybe later” into “do it now.” The deduction feels nice, but the real win comes after you invest. A dividend stock can help because it pays you to wait, and it can keep you calm when markets wobble.

Don’t chase the biggest yield. Look for cash that can cover the payout across a full cycle, plus a business model you actually understand. In an RRSP, you also don’t pay annual tax on dividends, so compounding gets more runway. But quality still matters, because you can’t use a capital loss inside a registered account if a thesis breaks. So, let’s look at one to consider.

LIF

Labrador Iron Ore Royalty Corporation (TSX:LIF) is a different kind of dividend name. It doesn’t operate a mine. It earns royalties and equity income from the Iron Ore Company of Canada (IOC), which sells iron ore concentrate and pellets. When prices and volumes cooperate, cash can gush. When the cycle cools, the payout can shrink. That variable profile is the first thing to accept, because this is not a slow-and-steady utility.

Over the last year, news has been a mix of stronger pricing and messier operating realities. In its third-quarter (Q3) 2025 report, LIORC said lower concentrate-for-sale sales tonnages and lower pellet premiums weighed on results, partly offset by higher iron ore prices and higher pellet sales volumes. Royalty revenue still rose 5% year over year to $43.4 million, but it fell 6% from the prior quarter. That’s the LIF experience in miniature: the commodity backdrop can improve, yet the details inside shipments, premiums, and timing can still swing the quarter.

The dividend cadence can also surprise people. LIORC said adjusted cash flow per share in Q3 2025 was $0.38, mainly because it received no dividend from IOC in the quarter, versus a $20.3 million IOC dividend in Q3 2024. That doesn’t mean the model broke. It means IOC pays dividends irregularly, based on cash availability, and LIORC’s distributable cash can swing with that schedule. If you need the same cheque every quarter, this dividend stock can test your patience.

Into earnings

Now to the earnings. In Q3 2025, equity earnings from IOC totalled $8.6 million, and net income per share was $0.47. Cash flow from operations was $32.7 million, or $0.51 per share. LIORC also noted the 65% Fe index averaged US$117 per tonne in the quarter, while the pellet premium averaged US$27 per tonne, down 32% from a year earlier. Premiums can move profitability faster than the headline iron ore price, and that’s why LIF can look “fine” on earnings while cash distributions still breathe.

For 2026, the outlook stays cautious, even with operational tweaks underway. Rio Tinto said IOC’s 2025 saleable production guidance should land at the low end of 16.5 million to 19.4 million tonnes, and IOC revised its 2025 capital expenditure outlook to US$288 million from US$342 million. LIORC also flagged that improving “pit health” at IOC will require increased stripping in the coming years, which could impact future IOC dividends to LIORC.

Valuation helps set expectations. The dividend stock trades at 17.7 times earnings with a 5.2% yield. Right now, here’s what that could bring in from a $7,000 investment.

COMPANYRECENT PRICENUMBER OF SHARESANNUAL DIVIDENDANNUAL TOTAL PAYOUTFREQUENCYTOTAL INVESTMENTLIF$30.45229$1.55$354.95Quarterly$6,973.05

Bottom line

So, is LIF a buy for RRSP season? It could be, if you want income with torque and you can handle uneven quarters. The upside is a debt-free structure and the potential for strong cash distributions when the cycle turns friendly. The downside is the same thing: commodity exposure, soft premiums, and irregular upstream dividends. I’d treat it as a satellite holding, not the foundation, and I’d pair it with steadier dividend payers, so your overall RRSP income doesn’t whipsaw. If you can hold it through the cycle without flinching, it can earn its place.

The post The Dividend Stock I’d Buy for RRSP Season appeared first on The Motley Fool Canada.

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Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.