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Russel Metals Inc. (TSE:RUS) will increase its dividend on the 15th of June to CA$0.40, which is 5.3% higher than last year's payment from the same period of CA$0.38. This will take the dividend yield to an attractive 4.4%, providing a nice boost to shareholder returns.
Check out our latest analysis for Russel Metals
Russel Metals' Earnings Easily Cover The Distributions
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, Russel Metals' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
EPS is set to fall by 47.2% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 55%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
Russel Metals Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the annual payment back then was CA$1.40, compared to the most recent full-year payment of CA$1.52. Its dividends have grown at less than 1% per annum over this time frame. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. Russel Metals has seen EPS rising for the last five years, at 21% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.
We Really Like Russel Metals' Dividend
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The earnings easily cover the company's distributions, and the company is generating plenty of cash. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Russel Metals that investors should know about before committing capital to this stock. Is Russel Metals not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.