Small market cap firms are generally riskier than bigger companies. You can cut that risk by focusing on market leaders with long histories of paying dividends such as this one.
Generally, a higher-than-usual dividend yield is a sign that the payout may exceed the company’s earning capacity. However, this company has held its dividends steady for several years, and we feel its current payouts continue to be safe. It’s also a leader in a niche industry, which cuts your risk.
The stock trades at 9.6 times the company’s 2023 earnings forecast.
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The Growing Power of Dividends
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The Best Canadian Dividend Stocks to Buy: REITS Canada and other Top Canadian Dividend Stocks.
RUSSEL METALS INC. (Toronto symbol RUS; www.russelmetals.com) is one of the largest metals distributors in North America with more than 30,000 end customers at 48 locations in Canada and 16 others in the U.S.
On December 1, 2021, Russel closed its acquisition of Arkansas-based Boyd Metals for $110 million U.S. Boyd specializes in providing carbon steel, stainless steel, and aluminum products. The purchase should add about $244 million U.S. to Russel’s annual revenue.
Russel has paid regular quarterly dividends of $0.38 a share since the third quarter of 2014; the annual rate of $1.52 yields a high 5.1%.
The company’s revenue in the three months ended September 30, 2022, jumped 14.4%, to $1.27 billion from $1.11 billion a year earlier. Revenues were higher at its Metals Service Centers and Energy Field Stores, offset by lower revenue for its Steel Distributors segment. However, higher employee and other costs cut Russel’s earnings by 31.0%, to $1.45 a share from $2.10.
Dividend Stocks: A sound balance sheet and low valuation add to the appeal
The balance sheet is sound. As of September 30, 2022, Russel held cash of $204.1 million, and its long-term debt of $295.7 million is a low 16% of its market cap.
The shares trade at around 9.6 times its projected 2023 earnings of $3.12.
Recommendation in Power Growth Investor: Russel Metals Inc. is a buy.