Oil, has been dominating the headlines on a seemingly daily basis. Of course this comes with good reason as a dramatic drop of almost 50% from summertime highs leave many asking the question of when the bottom will be hit. Though dramatic, the fall in oil price is hardly the only commodity to lose value in recent months. Another valuable commodity that is sensitive to world demand and is often used as a gauge in determining economic growth has fallen over 40% in the last year alone and has dragged down many stocks tied to it as well. I’m speaking of iron ore and the many steel and iron dividend paying companies that may present some compelling opportunities for investment at these reduced prices. Just for reference, in the last year alone iron ore prices have fallen from over $135 per dry metric ton to under $80. That’s a steep drop to say the least.
Some popular names in this space include Vale S.A. (VALE), Cliffs Natural Resources Inc. (CLF) and, of course, BHP Billiton plc (BBL). In fact the last few weeks have seen many dividend growth investors initiate or add to their positions in BBL. While the previous names are sensitive to iron ore commodity prices they are also more diversified in their endeavors and have exposure to multiple ore and metals production. For the sake of this article I will focus specifically on the steel and iron dividend stocks. Because the following companies are essentially tied to the vicissitudes of one underlying commodity one would expect higher volatility in their stock price. This is similar to the many names in the oil and gas sector as well. With that being said, let’s review some of the popular dividend paying stocks in the steel and iron sector.
|Company||Price||52 Week Lo||52 Week Hi||PE||Forward PE||Dividend Yield||Beta|
|United States Steel Corp. (X)||$27.82||$22.47||$46.55||41.58||7.75||0.70%||0.97|
|Reliance Steel & Aluminum Co. (RS)||$58.44||$58.40||$76.77||13.45||10.06||2.30%||1.31|
|Ternium S.A. (TX)||$16.83||$16.79||$32.99||6.40||5.78||4.20%||1.08|
|Schnitzer Steel Industries, Inc. (SCHN)||$22.25||$21.41||$33.32||100.68||16.86||3.20%||1.92|
|Nucor Corporation (NUE)||$51.88||$46.39||$58.76||24.70||14.66||2.80%||1.17|
|Commercial Metals Company (CMC)||$15.68||$14.21||$21.20||16.10||9.74||3.00%||1.48|
|Steel Dynamics Inc. (STLD)||$20.37||$15.80||$25.51||18.69||9.56||2.10%||1.50|
|Gerdau S.A. (GGB)||$3.13||$3.10||$8.27||9.60||3.48||2.80%||1.24|
|SunCoke Energy Inc. (SXC)||$18.80||$18.54||$24.57||76.64||29.84||1.20%||1.41|
Clearly, oil and energy services names aren’t the only high beta names in town. Looking to add some commodity volatility to your dividend portfolio and are overweight in energy, then consider some steel and iron pure plays. As you can see all the stocks are at or near their 52 week lows and with iron ore prices still falling as with oil, some of these names may offer some real value going forward. It seems that oversupply is affecting the iron ore trade just as oil. The question of risk/reward then comes into play as potential purchases in these names will allow you to get paid to wait for the inevitable rise in commodity prices down the road. Of course, further research is required before considering any of the names above but there does seem to be some interesting values that have come into play.
Where do you think commodity prices are headed in the near and long term? Are any of these pure play steel and iron companies in your dividend portfolio? Please let me know below.
Disclosure: Long NONE