Confident Commercial Metals Boosts Its Cash Dividend

Dec.28.07 | About: Commercial Metals (CMC)

Commercial Metals Company (CMC) has recently increased its quarterly cash dividend from 9 to 12 cents per share, an increase of 33-1/3%. This new dividend rate is effective with the regular quarterly cash dividend which is to be paid January 24, 2008 to shareholders of record January 10, 2008.

  • This is the 173rd consecutive quarterly cash dividend paid by Commercial Metals Company.

CEO and President Murray McClean noted:

“This increase reflects CMC’s confidence in our business prospects. Rewarding and sustainable increases in our cash dividend rate, as evidenced by this significant increase, are an important element of that continuing effort and demonstrates our continuing aggressive focus on stockholder value.”

This announcement represents CMC’s fourth recent cash dividend increase.

  • In April 2006, CMC’s dividend was increased 67%.
  • Following CMC’s two-for-one stock dividend in May 2006 the cash dividend was again increased by 20% in July 2006 and 50% in November 2006.

As a result of these increases, the cash dividend increased four fold over the past two years.

Commercial Metals has a paltry dividend payout ratio of less than 15% which allows the company to reinvest the majority of profits back into the company…which isn’t a bad idea as CMC currently boasts a Return on Equity of nearly 23%.

As for the outlook on the steel sector, analyst, Carol Cowan of Moody’s recently stated that:

“Strong overall global demand has supported pricing in every region throughout 2007, with China again providing tremendous support for global steel consumption”

“Demand in the U.S. has also remained solid, despite weakness in the appliance and automotive markets, largely driven by high levels of commercial construction activity.”

Cowan also singled out several steel companies including Commercial Metals as strong players in the market with a lot of potential to benefit in 2008 because of strong demand for their products.