Yahoo Finance What Makes Reliance Steel & Aluminum Co (NYSE:RS) A Great Dividend Stock?
Reliance Steel & Aluminum Co (NYSE:RS) has pleased shareholders over the past 10 years, by paying out dividends. The company is currently worth US$5.8b, and now yields roughly 2.6%. Should it have a place in your portfolio? Let’s take a look at Reliance Steel & Aluminum in more detail.
See our latest analysis for Reliance Steel & Aluminum
5 questions I ask before picking a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
Does it pay an annual yield higher than 75% of dividend payers?
Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
Has it increased its dividend per share amount over the past?
Does earnings amply cover its dividend payments?
Will it have the ability to keep paying its dividends going forward?
How well does Reliance Steel & Aluminum fit our criteria?
The current trailing twelve-month payout ratio for the stock is 17%, which means that the dividend is covered by earnings. Going forward, analysts expect RS’s payout to increase to 26% of its earnings, which leads to a dividend yield of 2.7%. However, EPS is forecasted to fall to $9.13 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. In the case of RS it has increased its DPS from $0.40 to $2 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.
Relative to peers, Reliance Steel & Aluminum has a yield of 2.6%, which is high for Metals and Mining stocks but still below the market’s top dividend payers.
Next Steps:
Considering the dividend attributes we analyzed above, Reliance Steel & Aluminum is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. Below, I’ve compiled three important factors you should further examine:
Future Outlook: What are well-informed industry analysts predicting for RS’s future growth? Take a look at our free research report of analyst consensus for RS’s outlook.
Valuation: What is RS worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether RS is currently mispriced by the market.
Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
