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?
|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|
|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.