Commercial Metals Company’s 2.2% Dividend Yield Outperforms Industry Averages (CMC)
By: Ned Piplovic,
The Commercial Metals Company (NYSE:CMC) continues to distribute steady dividend payments to shareholders, and its current 2.2% dividend yield outperforms the average yield of the company’s peers in the industry segment.
On June 22, 2018, CMC posted mixed results for the third quarter of its fiscal year. While revenues lagged projected estimates by 5.3%, earnings met estimates of $0.48 per share. According to Yahoo Finance, analysts’ opinions are split about the stock right now, with four “Hold” recommendations, two “Buy” recommendations and two “Strong Buy” recommendations.
However, CMC seems to come with more plusses than minuses. For example, the analysts’ average target share price of $25.70 is 16.4% higher than the $22.08 closing price on June 25, which would indicate that the stock has room to grow. Also, CMC’s share price managed to maintain a moderate two-year uptrend despite significant volatility.
Investors interested in potential double-digit-percentage appreciation and a long dividend track record should be aware that the next dividend distribution will be on July 19, 2018 to all shareholders of record prior to the July 3 ex-dividend date
Commercial Metals Company (NYSE:CMC)
Headquartered in Irving, Texas and founded in 1915, the Commercial Metals Company manufactures, recycles and markets steel and metal products through five business segments. The Americas Recycling segment processes and sells scrap metals to mills and foundries producing aluminum, brass, bronze and copper sheets and ingots, as well as secondary lead smelters, specialty steel mills and high temperature alloy manufacturers. The Americas Fabrication segment offers fabricated steel products for use in the construction of commercial and non-commercial buildings, hospitals, convention centers, industrial plants, power plants, highways, bridges, arenas, stadiums and dams. Additionally, the Americas Mills and the International Mill segments manufacture finished long steel products, including reinforcing bars, merchant bars and light structural products, as well as semi-finished billets for re-rolling and forging applications for their respective geographical markets. Finally, the International Marketing and Distribution segment processes, sells and distributes steel products, ferrous and nonferrous metals, and other industrial products to manufacturers in the steel, nonferrous metals, metal fabrication, chemical, construction and transportation industries.
CMC began distributing dividends in 1998 and boosted its annual payout eight times during the first decade. Over that first decade of dividend payments, the annual dividend amount was enlarged nearly 640%, which corresponds to an average growth rate of more than 22% per year.
However, after a decade of extraordinary dividend growth, the company’s annual dividend amount leveled off at $0.12 per share around the time of the 2008 financial crash and has remained at a steady level over the past 11 consecutive years. While steady dividend income is a positive characteristic, it failed keep pace with the rising share price, which has more than doubled since the lows in 2008. As a result, the dividend yield declined from the 2.6% average over the past five years to the current 2.2% yield.
Even so, Commercial Metals’ current yield is even with the 2.2% average yield of the entire Basic Materials sector. Also, it fares much better in comparison to the 1.06% simple average yield of the Steel & Iron Industry segment, which it exceeds by more than 105%. Even the 1.9% dividend yield of only dividend-paying companies in the segment is 12% below CMC’s current dividend yield.
The first two months of the trailing 12-month period saw a decline of nearly 10% to a low of $17.08, as the company’s shares were in the midst of some moderate volatility, However, the stock then showed some strength, gaining 53% in the face of continuous volatility to a 52-week high of $26.13 on March 7, 2018.
In the last few months, CMC’s share price has bounced around. The stock gave back nearly all its one-year gains by early April 2018, only to rally more than 14% and close on June 25 at $22.08. This closing price was 15.5% short of the March peak price, but 17.4% higher than it was one year earlier, 29.3% above the 52-week low from August 2017 and 53% higher than it was five years ago.
While Commercial Metals has seen a slow, but steady, uptrend over the last decade, the steady dividend payouts have really helped to amplify total return on investment. Over one year, counting dividends, the annual total return was 27%. Similarly, the total return was 50% over the past three years and more than 85% over the past five years.
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Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.