Stock Analysis

BlueScope Steel (ASX:BSL) Is Paying Out A Larger Dividend Than Last Year

  •  Updated
ASX:BSL
Source: Shutterstock

BlueScope Steel Limited (ASX:BSL) has announced that it will be increasing its dividend on the 13th of October to AU$0.44. Despite this raise, the dividend yield of 2.0% is only a modest boost to shareholder returns.

Check out our latest analysis for BlueScope Steel

BlueScope Steel's Earnings Easily Cover the Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, BlueScope Steel was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise exponentially over the next year. If the dividend extends its recent trend, estimates say the dividend could reach 18%, which we would be comfortable to see continuing.

historic-dividend
ASX:BSL Historic Dividend August 18th 2021

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2011, the dividend has gone from AU$0.24 to AU$0.31. This implies that the company grew its distributions at a yearly rate of about 2.6% over that duration. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

BlueScope Steel May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. BlueScope Steel hasn't seen much change in its earnings per share over the last five years. While EPS growth is quite low, BlueScope Steel has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On BlueScope Steel's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for BlueScope Steel that you should be aware of before investing. We have also put together a list of global stocks with a solid dividend.

When trading BlueScope Steel or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted


Valuation is complex, but we're helping make it simple.

Find out whether BlueScope Steel is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis