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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?

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.