Schnitzer Steel Industries (NASDAQ:SCHN) Is Paying Out A Dividend Of $0.1875

The board of Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) has announced that it will pay a dividend of $0.1875 per share on the 31st of July. Based on this payment, the dividend yield will be 2.5%, which is fairly typical for the industry.

View our latest analysis for Schnitzer Steel Industries

Schnitzer Steel Industries Doesn't Earn Enough To Cover Its Payments

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, the company was paying out 200% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 67%. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

EPS is set to fall by 38.0% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 320%, which could put the dividend under pressure if earnings don't start to improve.

Schnitzer Steel Industries Has A Solid Track Record

The company has an extended history of paying stable dividends. The last annual payment of $0.75 was flat on the annual payment from10 years ago. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

The Dividend Has Limited Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Schnitzer Steel Industries' earnings per share has shrunk at 38% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

Our Thoughts On Schnitzer Steel Industries' Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 4 warning signs for Schnitzer Steel Industries that investors should take into consideration. Is Schnitzer Steel Industries not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.