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United States Steel Corporation (X), Nucor Corporation (NUE), Steel Dynamics, Inc. (STLD): How Safe Are the Dividends of These 3 Steel Producers?

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The outlook for steel producers is not very good. With Chinese growth slowing and demand for steel around the world faltering, steel producers are finding it hard to turn a profit. That said, some of these companies actually offer dividend yields greater than 3%, above the market average of around 2%. So, with the outlook for the steel market deteriorating, are the dividend payouts of these companies sustainable?

United States Steel Corporation (NYSE:X)

The contenders

Company P/E Dividend yield EPS DPS Payout Ratio
United States Steel Corporation (NYSE:X) 285 1.2% $0.06 $0.2 131%
Nucor Corporation (NYSE:NUE) 31.4 3.4% $1.4 $1.5 106%
Steel Dynamics, Inc. (NASDAQ:STLD) 20.2 3% $0.7 $0.4 54%

Steel Dynamics, Inc. (NASDAQ:STLD offers a dividend yield of 3% and a payout ratio of 54% — the best out of the three steel companies mentioned above. Both Nucor Corporation (NYSE:NUE) and United States Steel Corporation (NYSE:X) have payout ratios above 100%, indicating at first glance that they cannot afford their dividend payouts.

United States Steel

Metric Q2 2012 Q3 2012 Q4 2012 Q1 2013
Net Operating Cash Flow $404 $103 $202 $200
Capital Expenditures -$208 -$139 -$187 -$116
Net Investing Cash Flow -$199 -$211 -$136 -$92
Cash Available For Financing Activities $205 -$108 $66 $108
Cash Dividends Paid – Total -$7 -$8 -$7 -$7
Issuance/(Reduction) of Debt, Net ($280) $83 ($405) $69
Dividend Cover From Cash Available For Financing Activities 29 0.0 9.4 15
Free Cash Flow $189 -$44 $8 $77

*Figures in millions of dollars. Financing activities include dividend payouts, changes in capital stock and the movement of debt.

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