Russel Metals Inc.

I own this stock of Russel Metals Inc. (TSX-RUS, OTC-RUSMF). This was a stock on Mike Higgs' Canadian Dividend Growth List. In 2007 I needed to reduce my holdings of Loblaws and buy something to help replace the dividends I had been earning. With Russel Metals, both Mike and TD recommend buying at this time.

I have dividend information on this stock from 1990. Between 1993 and 1999 inclusive, this stock did not pay any dividends. It started to again pay dividends in 2000 and in 2003 it was rapidly increasing the dividends. In 2009 dividends were decreased by around 45% and then were level for 2010 and then in 2011 they again increased their dividends.

The most recent increase was in 2012 with a dividend increase of 16.7%. In 2013 dividends were again flat. Analysts do not expect any dividend increases for 2014 or 2015. The dividend growth over the last 5 and 10 years do not really tell you anything as dividends can vary. The dividend yield has generally been quite good with a 5 year median of 4.9% and a current dividend at 4.6%.

The 5 year Dividend Payout Ratios are 82% and 61% for EPS and CFPS. The DPR for 2013 were higher at 102% and 72% for EPS and CFPS. The DPR for 2014 is expected to be around 73% and 51% for EPS and CFPS.

I bought this stock first in 2007 and then some more in 2009 and 2011. My total return is 7.57% per year with 4.65% per year from dividend and 2.92% per year from capital gains. The 5 and 10 year total return on this stock is 17.26% and 13.87% per year with 11.58% and 7.06% per year from capital gains and 5.68% and 6.81% per year from dividends.

The outstanding shares increased by 0% and 3.5% over the past 5 and 10 years. Shares increased due to Stock Options and Bond Conversions and decreased due to buy backs. Revenues, earnings and cash flow have had nice growth over the past 10 years, but generally there has been no growth over the past 5 years.

For revenue, there was a big decline in 2009 and revenue has been increasing since then. However, revenues are not quite back to where they were in 2008. The 5 decrease in Revenues is at 1.1% per year and the 10 years increase in revenue is at 7.8% per year. The Revenue per Share is down by 1.5% per year over the past 5 years and up by 4.1% per year over the past 10 years.

Both earnings and cash flow are different than revenues. They both declined in 2009 and 2010. 2011 was a good year, but then both again declined in 2012 and 2013. Analysts expect 2014 and 2015 to be better. However, analysts had also expected 2013 to be better and it was not. This is not the first time that this company has had weak growth in earnings and cash flow. This happened in the early 1990's and again in the early 2000's.

Earnings are down by 18% per year over the past 5 years and up by 16% per year over the past 10 years. EPS is down by 17.8% per year over the past 5 years and up by 13.4% per year over the past 10 years.

Cash flow is down by 14% per year over the past 5 years and up by 11% per year over the past 10 years. CFPS is down by 15% per year over the past 5 years and up by 7.5% per year over the past 5 years.

The Return on Equity has been below 10% 3 times in the last 10 years. The ROE for 2013 is 9.4% and the 5 year median is also 9.4%. The ROE on Comprehensive Income is better in 2013 at 13.8%. The 5 year median ROE on Comprehensive Income is 10.7%.

The current Liquidity Ratio is 3.50 and it has always been quite strong with a 5 year median of 3.50. The Debt Ratio is also very good at 1.94 with a 5 year median of 2.14. The Leverage and Debt/Equity Ratios are fine, but not great at 2.06 and 1.06, respectively.

I obviously paid too much for the shares I bought in 2007. However, later shares were at better prices, especially those I bought in 2009. Why you might want to own this stock is the good dividend yield which is currently at 4.6% and the dividend portion of the total return over the past 5 and 10 years is at 5.7% and 6.8% per year. However, this is not a dividend growth stock as dividends can vary. The company also has a strong balance sheet. .See my spreadsheet at rus.htm.

This is the first of two parts. The second part will be posted on Friday, April 25, 2014 and will be available here. The first part talks about the stock and the second part talks about the stock price.

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.

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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

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