The southern Labrador Trough-focused company's CEO, David Cataford, said the near completion of Bloom Lake phase two - which was brought forward from mid-year to April - created the stability required to deploy the capital returns.
Commercial production from the second phase was scheduled to take place by the end of 2022.
BMO Capital Markets analyst Alexander Pearce said the dividend represented an annualised yield of roughly 4% and was a quarter ahead of the investment bank's forecast.
"Whilst relatively modest initially, we believe it opens the door for attractive shareholder returns, particularly once the company delivers Bloom Lake phase two this year," he said.
The dividend implied a payout ratio of 15% and BMO forecast a 40% payout from fiscal year 2023, Pearce said.
Champion's financial year ends on March 31.
The TSX and ASX miner announced the dividend and project advancement while releasing its December quarter results.
For the three-month period, production was 2.01 million wet tonnes of 66.2% iron ore concentrate, which compares with 1.92Mwmt a year earlier, and came amid scheduled maintenance.
Production for the nine-month period ending December 31 was 6.04Mwmt, compared with 5.Mwmt for the same period a year earlier.
During the third quarter, 1.83Mwmt of high-grade iron ore concentrate was sold. The net average realised selling price was US$109.50 per tonne, Champion said.
BMO's Pearce said that while the shipments volume was 4% below BMO's forecast, realised pricing came in 17% higher - "likely due to higher premiums/timing".
Champion shares jumped 8.7% today to A$6.34, valuing the company at about $3 billion.