Russel Metals Inc

On my other blog I am today writing about comprehensive income...continue...

I own this stock of Russel Metals Inc. (TSX-RUS, OTC- RUSMF). If first bought this stock in 2007 and it promptly went down by some 26%. I got the stock off of Mike Higgs' list of dividend paying growth stocks. It had a generally good track record, so I have kept it and bought more in 2009 and 2011. I have made a total return of 6.84% per year with 4.45% from dividends and 2.39% from capital gains.

If you look at the 5 and 10 year total return on this stock they are at 6.50% and 29.69% per year. The dividend portion of this total return was 4.89% and 11.30% per year with the capital gain portion at 1.61% and 18.38% per year.

If you look at the growth in dividends there is none over the past 5 year and the negative growth is at 5%. However, over the past 10 years, dividends have grown at 21%. The reason is that they just started dividends in 2000 and they moved up rapidly until 2008. However, the recent recession has hit this stock hard and dividends were cut by 45%.

However, dividends have been growing since 2011. The latest dividend increase was in 2012 and it was an 18% increase. The dividend yield is good at a current 5.1% and a 5 year median at 5.2%. The Dividend Payout Ratios are good with 5 year median DPR for earnings at 60% and cash flow at 47%. Russel Metals sees their target dividend payout ratio as 80% of earnings over a business cycle.

Over the past 5 years outstanding shares have declined by 1% per year and over the past 10 years have increased by 4.7% per year. Outstanding shares have decreased due to share buyback. Shares have increased due to stock options and the conversion of convertible debentures to shares.

The revenues of the company have grown at the rate of 3.2% and 7.9% per year over the past 5 and 10 years. Revenue per Share has grown at the rate of 4.2% and 3.1% per year over the past 5 and 10 years.

The Earnings per Share has declined over the past 5 years at 1.4% per year and has grown over the past 10 years at 9.2% per year. There is wide disagreement over EPS for 2013 and 2014, but all analysts expect earnings to climb well over the next while.

Cash Flow per Share did not grow over the past 5 years, but grew at the rate of 4.2% per year over the past 10 years. The financial year ending in 2012 was not a great year for this company, but analysts also expect CFPS to grow over the next two years.

The Return on Equity for this company was 12.4% for the financial year ending in 2012. The 5 year median ROE is also 12.4%. The ROE on comprehensive income is also good, but a little lower for 2012 at 10.7% with a 5 year median also at 10.7%.

The debt ratios have been good on this company, with the 2012 Liquidity Ratio at 3.27 and the Debt Ratio at 1.86. The Leverage and Debt/Equity Ratios are a little higher than normal at 2.25 and 1.21. The 5 year median Leverage and Debt/Equity Ratios are 1.91 and 0.87.

My Accrual Ratio at 18.72% is high and might suggest that the quality of the earnings or cash flow is not as good as they could be. However, the difference between the ROE on Net Income and Comprehensive income is not that great at 13%. A difference between the ROE on Net Income and Comprehensive income also questions the quality of earnings. The EPS/CF Ratio is 0.74 and is below 1.00 and this is good. A high Accrual Ratio is just a warning.

I still expect to do well in this stock over the long term. It is an Industrial stock, so it will have more volatility over the business cycle, than say utility stocks. Because of volatility it is also riskier.

Russel Metals Inc. is one of the largest metals distribution and processing companies in North America. The Company primarily distributes steel products and conducts its distribution business in three principal business segments: metals service centers; energy tubular products and steel distributors. Its web site is here Russel Metals. See my spreadsheet at rus.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.