Is Steel Dynamics Inc (NASDAQ:STLD) An Attractive Dividend Stock?

Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Over the past 10 years, Steel Dynamics Inc (NASDAQ:STLD) has returned an average of 2.00% per year to shareholders in terms of dividend yield. Let’s dig deeper into whether Steel Dynamics should have a place in your portfolio. See our latest analysis for Steel Dynamics

5 checks you should use to assess a dividend stock

When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:

• Does it pay an annual yield higher than 75% of dividend payers?

• Has it paid dividend every year without dramatically reducing payout in the past?

• Has dividend per share amount increased over the past?

• Is its earnings sufficient to payout dividend at the current rate?

• Will it be able to continue to payout at the current rate in the future?

NasdaqGS:STLD Historical Dividend Yield June 22nd 18

How does Steel Dynamics fare?

Steel Dynamics has a trailing twelve-month payout ratio of 18.54%, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 16.68%, leading to a dividend yield of around 1.61%. However, EPS should increase to $5.21, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.

Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Shareholders would have seen a few years of reduced payments in this time.

Relative to peers, Steel Dynamics has a yield of 1.61%, which is on the low-side for Metals and Mining stocks.

Next Steps:

With this in mind, I definitely rank Steel Dynamics as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three fundamental factors you should look at:

1. Future Outlook: What are well-informed industry analysts predicting for STLD’s future growth? Take a look at our free research report of analyst consensus for STLD’s outlook.

2. Valuation: What is STLD worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether STLD is currently mispriced by the market.

3. Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.