Steel Does Bend, But Will it Break? (X, SCHN, NUE, MT, RS)

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Similar to what happened to coal stocks yesterday, steel stocks took a drubbing as well. Momentum traders have infiltrated the ownership of these normally sedate stocks. When these momentum players decide to leave, they sometimes travel in packs, causing a fast sell-off. The dividend-paying steel names we've been recommending have grown more rapidly than we had anticipated. U.S. Steel (X), Schnitzer Steel (SCHN), Nucor (NUE), Arcelor Mittal (MT) and Reliance Steel (RS) are all seeing tremendous demand, and have had pricing power to match. This phenomenon is causing higher gross profit margins, which, in turn, enables these companies to increase their earnings guidance. This highly favorable set of conditions is called "having the wind at your back," for short. These steel companies do not offer mind-blowing dividend yields, however:

  • U.S. Steel (X) - .65% dividend yield (stock price is up 40% year to date)
  • Schnitzer Steel (SCHN) - .07% dividend yield (stock price is up 45% year to date)
  • Nucor (NUE) - 2.07% dividend yield (stock price is up 10% year to date)
  • Arcelor Mittal (MT) - 1.80% dividend yield (stock price is up 11% year to date)
  • Reliance Steel (RS) - .58% dividend yield (stock price is up 30% year to date)
Just as we recommended with the coal stocks after yesterday's brutal sell-off, we suggest letting the momentum traders finish panicking. Then, start scaling into some of these steel names in small increments. Sometime next week would most likely be the best time to start supporting your portfolio with steel. We're currently recommending all four of the names mentioned in this article. U.S. Steel (X) is a "Recommended" dividend stock, currently holding a Dividend.com rating of 3.6 out of 5 stars. Schnitzer Steel (SCHN) is also a "Recommended" dividend stock, currently holding a Dividend.com rating of 3.8 out of 5 stars. Nucor Steel (NUE) is a "Recommended" dividend stock, currently holding a Dividend.com rating of 3.9 out of 5 stars. Arcelor Mittal (MT) is also a "Recommended" dividend stock, currently holding a Dividend.com rating of 3.7 out of 5 stars. Reliance Steel (RS) is also a"Recommended" dividend stock, currently holding a Dividend.com rating of 3.8 out of 5 stars. Be sure to visit our complete recommended list of the Best Dividend Stocks as well as a detailed explanation of our ratings system here.

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