Russel operates in the cyclical manufacturing sector. Current weakness in its share price presents a buying opportunity. While you wait for this cyclical rebound, Russel’s yield makes it one of the top Canadian dividend stocks.
Russel Metals Inc. (TSX─RUS) is one of the largest metals distribution companies in North America. It carries on business in three distribution segments: metals service centers, energy products and steel distributors, under various names such as Russel Metals, A.J. Forsyth and Acier Leroux.
The company’s network of metals service centers carries a broad line of metal products in a wide range of sizes, shapes and specifications, including carbon hot rolled and cold finished steel, pipe and tubular products, stainless steel and aluminum. The energy products operations distribute oil country tubular goods, line pipe, tubes, valves and fittings. And the steel distributors sell steel in large volumes to other steel service centers and large equipment manufacturers mainly on an “as is” basis.
We’ve included Russel Metals in our Income Trust Guide because it helps to round out our income selections and other common stocks we recommend in Money Reporter by giving you exposure to Canadian manufacturing companies stocks. Keep in mind, though, that companies that operate in this sector tend to be cyclical in nature. That’s true of Russel Metals.
The company, for example, was hard hit in the recession of 2008 to 2009. Consequently, in 2009 it posted a loss and cut its dividend per share to $1.00 from $1.80. But it was able to maintain a dividend through the recession, and it’s paid a dividend in each year since 2000. Indeed, one of the company’s goals is to lead manufacturing stocks with the sector’s highest dividend yield.
Since the dark days of 2009, Russel’s revenues, earnings and dividend have all rebounded. Revenues have increased 96 per cent since then to $3.9 billion in 2014. Earnings per share have increased from a loss of $1.54 in 2009 to a profit of $2.01 in 2014. And the dividend per share has risen 52 per cent over this time period to $1.52.
The deterioration in the price of oil has led Russel’s energy customers to announce reductions in their projects and capital expenditures. Consequently, the shares have declined 36 per cent from the highs they achieved last summer. That makes them attractive, in our view, for a cyclical rebound when conditions improve.
The current annual dividend of $1.52 a share yields over six per cent. Russel Metals is an attractive buy for growth and income if you can tolerate its cyclical nature.
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