New Zealand markets open in 8 hours 45 minutes
  • NZX 50

    10,958.81
    -59.79 (-0.54%)
     
  • NZD/USD

    0.6227
    -0.0012 (-0.19%)
     
  • ALL ORDS

    6,877.90
    -75.50 (-1.09%)
     
  • OIL

    113.31
    +1.55 (+1.39%)
     
  • GOLD

    1,833.20
    +12.00 (+0.66%)
     

Russel Metals (TSE:RUS) Has Re-Affirmed Its Dividend Of CA$0.38

·3-min read

The board of Russel Metals Inc. (TSE:RUS) has announced that it will pay a dividend of CA$0.38 per share on the 15th of June. Based on this payment, the dividend yield on the company's stock will be 4.9%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Russel Metals

Russel Metals' Earnings Easily Cover the Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, prior to this announcement, Russel Metals' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to fall by 42.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 37%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

historic-dividend
historic-dividend

Russel Metals Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from CA$1.20 in 2012 to the most recent annual payment of CA$1.52. This implies that the company grew its distributions at a yearly rate of about 2.4% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Russel Metals has seen EPS rising for the last five years, at 39% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like Russel Metals' Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Russel Metals that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting