One Company Pays $950 Million in ‘Liberty Checks’

2018 will be a record year for “liberty checks.”
Shareholders in U.S. companies have already received $113 billion in “liberty checks” through the first three months of the year. That’s a 10% increase over the payments received in the year-ago period.
One small-cap company has taken the lead in paying “liberty checks.”
Warrior Met Coal (NYSE: HCC), a $1.6-billion market-cap coal miner, has paid $950 million in “liberty checks” to its shareholders. These checks were dispersed in two installments within a five-month period.
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Warrior Met Coal Payouts

The first installment occurred in November. Those who owned Warrior Met Coal shares received an $11.21 “liberty check” for every share owned. The second installment occurred this past April. Warrior Met Coal shareholders received a $6.53 “liberty check” for every share owned.
The tally is impressive. Warrior Met Coal shareholders received $1,774 in “liberty checks” for every 100 Warrior Met Coal shares owned. That’s a 60% return on investment.
Now, for the obvious question: How can Warrior Met Coal afford to pay such munificent “liberty checks” to its shareholders?
Business is good. That’s one reason.
Warrior Met Coal is a leading miner of metallurgical coal. This is the stuff used to produce hard coking coal, a key ingredient in steel production.
Steel demand in on the rise. The World Steel Association expects global steel demand to reach 1,616 million metric tons in 2018, a 1.8% increase over 2017. Demand is expected to grow another 0.7% in 2019.
Quality matters when it comes to metallurgical coal. A blast furnace fed with high-quality coke will require less coke and flux. Quality coke lowers production costs and produces better hot metal. Warrior Met Coal produces the high-quality metallurgical coal to make the high-quality coking coal.
Warrior Met Coal has benefited from rising demand for steel and the metallurgical coal to manufacture it. Revenue increased 66% year-over-year for the first quarter. EPS increased 62%. Warrior Met Coal generated $194 million in operating cash flow for the quarter. This is triple the operating cash flow produced in the year-ago quarter.
Tax reform is another reason.
The corporate income tax rate was lowered to 21% from 35% this past December. That’s a 40% reduction. The lower tax rate allows profitable companies to retain more of their profits. The more profits a company can retain, the more “liberty checks” it can pay to its shareholders.

Rising Profits and Lower Taxes

The dynamic of rising profits and lower income-tax rates has worked to benefit Warrior Met Coal shareholders.
I expect the dynamic to work for other companies to similar effect. More earnings will funnel into the cash account. More cash on hand, and more cash flow, will drive more “liberty check” payments.
But not all “liberty checks” will be worth collecting. Indeed, most won’t be worth collecting. I say that because most “liberty checks” will be paid to yield only 3% to 5% on investment.
You can do much better, as Warrior Met Coal proves.
I can show you how to collect “liberty checks” that are 10X the average dividend check. What’s more, I can show you how to trade the stock of “liberty check” issuers for triple-digit annualized returns.
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