Great Northern Ore: Great dividend, but the devil is in the details

If you look at the basic information on Great Northern Iron Ore Properties (NYSE: GNI), it looks like a no-brainer. This Minnesota-based company leases its lands to mining companies and makes its money off royalties from these companies' extractions. Net profit margins are over 80% and it's currently trading very close to the low end of its 52-week range. Plus, there's a huge dividend of $11.20 per share, for a yield of more than 10%.

So where's the rub? Well, GNI is a trust that was created in 1906 and was scheduled to expire 20 years after the death of the last living person named in the original trust. This last survivor passed away in 1995, meaning the trust will expire in 2015, or about eight years from now.

What does this mean for investors? Shareholders of record at the time of expiration will be paid a fee for each share, probably about $10 apiece. Given that the stock is now trading over $100, you can see where it might be easy to get burned.

I don't expect this stock to have much growth potential from here -- who is going to be willing to pay a huge amount for a stock that's due to expire? On the other hand, I can imagine some speculative action on this company as the expiration date nears -- with the dividend there should be interest in the company, and it's possible the stock will slip to a point where it's undervalued. So it's all about a judgment call on this stock -- where can you buy it and not worry about losing too much value while still collecting the dividend?

Type of stock: A mining trust company with great margins and a great dividend – but a real risk for a serious drop in stock price at some point down the road.

Price target: At the very low end of its 52-week range, I don't think this is going to lose a huge amount of value if you buy now around $100. With another eight years before it expires, you'll have some time to hope for a rebound if the stock price drops, and you'll be getting a 10% return from the dividend.