Russel Metals reported revenue of $1.2-billion for the three months to the end of June.
Given the onerous 50-per-cent tariffs President Donald Trump has placed on U.S. steel and aluminum imports, you’d think that this would be a terrible time to be in the metals business in Canada.
But not everyone in the industry seems to be suffering. Russel Metals Inc. RUS-T, which we recommended in my Income Investor newsletter in November, 2021, at $35.72, is holding up surprisingly well.
True, the share price hasn’t budged much from the start of the year, closing on Friday at $40.62. But the dividend is an attractive and sustainable 4.3 per cent. And the second-quarter results released earlier this month were impressive.
The company reported revenue of $1.2-billion for the three months to the end of June. That was up 3 per cent from the first quarter and the highest level since mid-2022.
Net earnings were $60.4-million ($1.07 a share), a big jump from $49.9-million ($0.84 a share) in the same quarter of 2024. For the first six months of the year, Russel posted net earnings of $103.4-million ($1.82 a share), up from $99.6-million ($1.66 a share) in 2024.
Why the big improvement in the numbers? Believe it or not, much of the gain was due to Mr. Trump’s high tariffs. As many economists predicted, metals producers and distributors raised prices when foreign imports became more costly. Russel has operations in both Canada and the United States.
The company said that as of June 30, the prices for steel plate and sheet were up 33 per cent and 28 per cent respectively from Dec. 31 levels. The Midwest Premium price for aluminum was up 28 per cent. Management noted that the price for steel had moderated since then and cautioned that future steel prices may be affected by any changes in the tariff structure – always a possibility with Mr. Trump.
In the meantime, income-seeking investors are enjoying the rewards. The company raised its quarterly dividend by a penny in May to $0.43 a share ($1.72 a year), to yield 4.3 per cent. The last time Russel cut its dividend was during the Great Financial Crisis of 2007-09.
The company is also buying back shares. It purchased and cancelled 500,000 common shares in the second quarter at an average price of $42.11, for a total cost of $22-million. Since August, 2022, when the normal course issuer bid was established, Russel has bought 7.7 million shares, or about 12 per cent of its then-outstanding shares. The average cost was $37.61 for a total outlay of $288-million.
The company says it will renew its bid this month. It is seeking approval from the TSX to purchase up to 5.5 million shares, representing 10 per cent of the current public float, over a 12-month period.
Action now: Buy. This is not the type of company we normally recommend for income-seeking investors, but Russel Metals has a long history of maximizing shareholder value.
Gordon Pape is editor and publisher of the Internet Wealth Builder and Income Investor newsletters.