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?
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.
