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Steel and Iron companies are disparaged twice-over. Analysts consider these firms risky because they are part of the manufacturing sector, which has become a smaller component of US GDP. What’s more, steel and iron stocks are considered dangerous because their industry is cyclical, with revenues dependent on building and capital expenditures.

Despite these qualitative reservations, there are four dividend-paying steel and iron stocks which do not qualify as dangerous, according to long term performance and credit rating:

Ticker

Company

10-Year Average ROE

Altman Z-score*

CMC

Commercial Metals Company

10.8%

3.20

GNI

Great Northern Iron Ore Properties

98.6%

19.98

HSC

Harsco Corporation

13.2%

2.48

NUE

Nucor Corporation

17.1%

3.66

All of these firms have a long-term track record of attractive returns oo equity over the last 10 reported fiscal years—through the economic downturn. Moreover, CMC, GIN, and NUE have “safe” Altman Z-scores, while HSC scores in the indeterminate “grey-zone” band of stocks. None of these firms qualify as distressed by qualitative metrics. All four of these stocks sport attractive dividend yields in excess of the 10-year Treasury yield and in excess of the S&P 500 dividend yield.

Commercial Metals Company (NYSE:CMC) recently traded at $12.66 per share. At this price level, the stock has a 3.8% dividend yield. For 10 out of the past 10 fiscal years, a share of CMC paid a total of $2.75 in dividends. Of these dividend payments, a total of $2.22 were paid in the last five years.

CMC shareholders have endured a -7.6% change in share price over the past year. Shares of this small cap stock trade at a price-to-book ratio of 1.2 and a price-to-sales multiple of 0.2 (trailing twelve months). Over the past decade shareholders savored a 10.8% average annual return on equity.

Great Northern Iron Ore Properties (NYSE:GNI) recently traded at $120.46 per share. At this price level, the stock has a 12.5% dividend yield. For 10 out of the past 10 fiscal years, a share of GNI paid a total of $88.75 in dividends. Of these dividend payments, a total of $52.25 were paid in the last five years.

GNI shareholders have seen a 9.3% change in share price over the past year. At present, shares of this micro cap stock trade at a price-to-book ratio of 14.7, a price-to-earnings multiple of 8.5, and a price-to-sales multiple of 7.3 (trailing twelve months). Over the past decade shareholders savored a 98.6% average annual return on equity.

Harsco Corporation (NYSE:HSC) recently traded at $20.14 per share. At this price level, the stock has a 4.1% dividend yield. For 10 out of the past 10 fiscal years, a share of HSC paid a total of $6.42 in dividends. Of these dividend payments, a total of $3.76 were paid in the last five years.

HSC shareholders have sustained a -1.1% change in share price over the past year. At present, shares of this small cap stock trade at a price-to-book ratio of 1.1, a price-to-earnings multiple of 51.6, and a price-to-sales multiple of 0.5 (trailing twelve months). Over the past decade shareholders savored a 13.2% average annual return on equity.

Nucor Corporation (NYSE:NUE) recently traded at $42.87 per share. At this price level, the stock has a 3.4% dividend yield. For 10 out of the past 10 fiscal years, a share of NUE paid a total of $7.12 in dividends. Of these dividend payments, a total of $5.89 were paid in the last five years.

NUE shareholders have seen an 8.3% change in share price over the past year. At present, shares of this large cap stock trade at a price-to-book ratio of 1.8, a price-to-earnings multiple of 21.7, and a price-to-sales multiple of 0.7 (trailing twelve months). Over the past decade shareholders savored a 17.1% average annual return on equity.

Some of these stocks consider additional consideration for your income portfolio. CMC, HSC, and NUE appear reasonably-priced based on price multiples. Since both CMC and NUE have “safe” Altman Z-scores and 10-year average ROE’s, these two stocks deserve your attention, regardless of negative opinions you might harbor about the future of the steel and iron industry.

*The Altman Z-Score is a measure of bankruptcy risk that is not based on stock price volatility. This score places companies into three groups: “safe” (Z-score > 2.99), “grey” (Z-score between 2.99 and 1.81), and “distressed” (Z-score < 1.81), and is surprisingly useful for identifying bankruptcy risk in the coming year. This method of segmenting companies uses of fundamental (financial statement) data and market capitalization only, not on price volatility. Beyond credit risk prediction, companies with higher Z-scores have historically outperformed companies with lower Z-scores, in aggregate. One sector has not been accurately modeled: Altman’s Z-score has not accurately predicted the bankruptcy risk of financial companies.

“Distressed” was a label coined by researchers, and should not be taken to mean that any company is bankrupt or in default on the basis of this calculation alone. Credit scoring is not fate, only prediction based on relative past performance of companies grouped by key variables. Time will tell.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Disclaimer: This article was written to provide investor information and education, and should not be construed as a guarantee or investment advice. I have no idea what your individual risk, time-horizon, and tax circumstances are: please seek the personal advice of a financial planner. This article uses third-party data and may contain approximations and errors. Please check estimates and data for yourself before investing.

Source: 4 Steel And Iron Stocks With Tough-As-Nails Dividends