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What are we looking for?

Sustainable dividends from steelmakers and distributors ready to profit from a government-spurred boost to U.S. manufacturing.

The screen

U.S. Steel Corp. X-N is now the subject of a takeover battle, with its rivals looking to bolster their profits with its operations.

Their interest comes ahead of an expected rise in U.S. demand for steel, spurred by President Joe Biden’s climate-focused Inflation Reduction Act and his CHIPS and Science Act. The latter aims to lift domestic production of computer chips. Both should drive steel-dependent infrastructure and manufacturing construction projects.

In the short term, the steel industry could be held back by softness in Chinese demand. But longer term, new U.S. electric vehicles and battery production, plus wind farms and other clean-energy construction, will be key growth drivers.

Our search focused on top U.S. and Canadian steelmakers and distributors poised to gain from industry trends. We then applied our TSI Dividend Sustainability Rating System, which awards points to a stock based on key factors:

  • one point for five years of continuous dividend payments – two points for more than five;
  • two points if it has raised the payment in the past five years;
  • one point for management’s commitment to dividends;
  • one point for operating in non-cyclical industries;
  • one point for limited exposure to foreign currency rates and freedom from political interference;
  • two points for a strong balance sheet, including manageable debt and adequate cash;
  • two points for a long-term record of positive earnings and cash flow to cover dividends;
  • one point if the company is an industry leader.

Companies with 10 to 12 points have the most secure dividends or the highest sustainability. Those with seven to nine points have above-average sustainability; four to six points, average sustainability; and one to three points, below average sustainability.

More about TSI Network

TSI Network is the online home of The Successful Investor Inc., the group of widely followed Canadian investment newsletters by editor and publisher Pat McKeough. They include our award-winning flagship newsletter, The Successful Investor, and the TSI Dividend Advisor. TSI Network is also affiliated with Successful Investor Wealth Management.

What we found

Steel stocks with reliable dividends

Ranking*CompanyTickerDiv. Sustain. RatingPointsDiv. Yld. (%)Mkt. Cap. ($ Bil.)**1Y Ttl. Rtn. (%) Recent Price ($)**
1Nucor Corp.NUE-NAbove Average91.242.721.2170.26
2Stelco Holdings Inc.STLC-TAbove Average84.32.24.438.95
3Russel Metals Inc.RUS-TAbove Average84.02.538.940.10
4Algoma Steel Inc.ASTL-TAbove Average82.61.1-18.010.28
5Steel Dynamics Inc.STLD-QAbove Average81.617.722.5106.42
6Reliance Steel & Aluminum Co.RS-NAbove Average81.416.746.2284.48
7Commercial Metals Co.CMC-NAbove Average81.16.632.256.35
8U.S. Steel Corp.X-NAbove Average80.76.921.230.73

Source: Dividend Advisor. 

*Ranking is determined by TSI Dividend Sustainability Score. Where overall points are the same, analysts considered P/E, dividend yield and industry outlook to decide final placements.

**Share price and market cap are in native currency.

Our TSI Dividend Sustainability Rating System generated eight stocks. Stelco Holdings Inc. STLC-T and Algoma Steel Inc. ASTL-T, both based in Ontario, sell their steel in U.S. markets. U.S. Steel Corp., headquartered in Pittsburgh, is one of the world’s largest integrated steel producers. Based in North Carolina, Nucor Corp. NUE-N is one of the biggest and most diversified steel manufacturers in North America, offering a wide array of products. Steel Dynamics Inc. STLD-Q, headquartered in Fort Wayne, Ind., manufactures and sells its products in the U.S. Meanwhile, steel distributors and valued-added processors also profit from rising steel demand and prices. These include Mississauga, Ont.-based Russel Metals Inc. RUS-T, as well as Arizona’s Reliance Steel & Aluminum Co. RS-N and Texas-based Commercial Metals Co. CMC-N.

Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.

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