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Steel is commonly counted among the few metals that is highly recycled around the world. This happens as steel is a widely used metal in the modern-day society.
The Canadian steel industry, for one, has a notable history in terms of contributing to the progress of the economy. It is an important supplier to several transportations, energy and infrastructure sectors. Steel is also an important component in new innovations, such as electric vehicles (EV).
A report by national data agency Statistics Canada, published on August 27, has noted that the prices of basic and semi-finished iron or steel products surged by 5.9 per cent in the month of July. This was not only the 11th straight monthly increase, but also the highest year-over-year (YoY) surge at 50.9 per cent for such iron or steel products.
Now, let’s turn our attention to a dividend-paying Canadian steel stock that rocketed by about 436 per cent in the last one year.
How Stelco Holdings Inc (TSX: STLC) grew despite COVID
Stelco Holdings is a significant market player in Canada’s steel manufacturing industry, based in Ontario.
Established in 1910, the steel maker went public after the successful completion of its initial public offering (IPO) in November 2017.
Stelco is known to produce premium coated steel products, cold-rolled sheets, hot-rolled sheets, etc., which are manufactured in two of its factories near Nanticoke and Hamilton in Ontario.
Also Read: 5 Canadian Hot Stocks To Buy This May!
In the second quarter of fiscal 2021, Stelco Holdings posted a revenue of C$ 918 million. This was a top line growth of a whopping 123 per cent YoY, up from that of C$ 411 million in Q2 FY2020.
In Q2 FY2021, its gross profit was C$ 404 million, and net income was C$ 363 million.
Stelco pointed that the increase in its volume of steel and growth in the market price were the two main factors that contributed to the rise in its revenue in Q2 FY2021.
In the six months ending June 30, 2021, Stelco’s total revenue had grown by a substantial 85 per cent to amount to C$ 1.583 billion, up from that of C$ 856 million in the same period a year before.
1-year chart of stock performance, volume and moving average exponential of Stelco Holding (Source: EODHD/Others)
Stelco Holdings’ stock surged 122% YTD
Stelco Holdings held a market cap of nearly C$ 39 billion and a stock price of C$ 50.42 as on August 31.
On this day, the steel company posted earnings per share (EPS) of 3.91 and a price-to-earnings (P/E) ratio of 12.7, while its return on equity (ROE) stood at 61.65 per cent and its return on assets (ROA) was 19.27 per cent.
The steel company is expected to pay a dividend of C$ 0.20 per share on August 31 this year. Its dividend yield was standing at 1.587 per cent on August 31.
Going by Stelco’s last closing price of C$ 50.42 on August 30, the steel stock was trading 450 per cent above its 52-week low of C$ 9.16 (September 11, 2020). It had expanded by nearly 201 per cent in the last nine months, and grown by a substantial 122 per cent on a year-to-date (YTD) basis.
Bottom line
The recent price growth of iron and steel products have been primarily motored by a significant demand from China, the above-mentioned Statistics Canada report points. However, it adds that the price rise has been unstable due to evolving environmental policies, COVID-19, and other contributing factors.
China’s limitation on steel output is said to have put a dent in the demand for iron ore, leading to a stall in its price.
The report says that while the benchmark iron and steel prices are usually correlated, they were decoupled in August.
However, the rising demand for EVs and other infrastructural developments is likely to continue to fuel the demand of steel.
Also, Stelco’s notable stock price increase and significant revenue growth over the past year could lead to the company growing further in the future. Hence, it is among the stocks that investors could consider exploring further based on thorough research and understanding.
