COVID-19-induced slowdowns for this operator’s key markets, which include the oil and gas industry, have impacted both its revenue and earnings.
Still, its very high yield seems sustainable and its strong balance sheet further enhances its investment appeal.
RUSSEL METALSINC. (New York symbol XEC; www.russelmetals.com) is one of North America’s largest metal distributors: the company (symbol RUS on Toronto) serves 33,000 clients at 48 locations in Canada and 16 others in the U.S.
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Governments have designated most of Russel’s operations as “essential,” so they continued to operate during the COVID-19 lockdowns. Even so, the company’s revenue in the three months ended June 30, 2020, fell 37.2%, to $588.1 million from $936.7 million a year earlier. That reflects the slower economy and lower oil prices (Russel supplies pipes to oil and gas drillers).
Earnings were $4.6 million, or $0.07 a share. That’s down 69.4% from $30.8 million, or $0.50, a year earlier.
The company’s strong balance sheet should help it cope with the COVID-19 crisis. As of June 30, 2020, Russel held cash of $89.1 million, and its long-term debt of $445.4 million is a manageable 38% of its market cap. In addition, the company only needs to start repaying that debt in the spring of 2022.
Since the third quarter of 2014, Russel has paid quarterly dividends of $0.38 a share; the annual rate of $1.52 yields a very high 8.3%, but looks safe.
Russel holds an Above Average TSI Dividend Sustainability Rating.
Recommendation in Dividend Advisor: Russel Metals Inc. is a buy.
Comments
Jeff
Hello, while the 8.3% dividend is nice, it’s been at a cost of a loss of 40% of my investment with this stock. The dividend has not been increased in quite some time. Also, from what I’ve read from other analysts, little if any growth is expected anytime soon, so it doesn’t look like I’m going to recoup my investment anytime soon. What are your thoughts about whether any growth is expected in the near term. Why would one want to keep holding this stock? At 8% per year, it’s going to take a really long time to get my money back.
Russel Metals dropped earlier this year — along with most stocks — as the pandemic took hold. However, it has now recovered most of that decline…and we think it will continue to move higher.
Although my investing life has come to an end and I am now selling stocks to pay for my living expenses, I look forward to each and every publication from TSI. I gave up on stock brokers a long time ago because I found the best advice right here!
Jutta Fulford
Learn everything you need to know in
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X No, I don’t want to make steady income from dividends.
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Hello, while the 8.3% dividend is nice, it’s been at a cost of a loss of 40% of my investment with this stock. The dividend has not been increased in quite some time. Also, from what I’ve read from other analysts, little if any growth is expected anytime soon, so it doesn’t look like I’m going to recoup my investment anytime soon. What are your thoughts about whether any growth is expected in the near term. Why would one want to keep holding this stock? At 8% per year, it’s going to take a really long time to get my money back.
Russel Metals dropped earlier this year — along with most stocks — as the pandemic took hold. However, it has now recovered most of that decline…and we think it will continue to move higher.
Although my investing life has come to an end and I am now selling stocks to pay for my living expenses, I look forward to each and every publication from TSI. I gave up on stock brokers a long time ago because I found the best advice right here!
Jutta Fulford
Thank you Jutta. Always glad to hear from a satisfied customer. Good job.