Smart Dividend Portfolio Edition #55: Steely Growth
1
Dear Investor,
Welcome to the 55 th edition of TipRanks’ Smart Dividend Portfolio & Newsletter.
1
1
Market-Moving News: April 7, 2025
Stocks capped their worst week since the global pandemic-induced market carnage in March 2020. The Dow Jones Industrial Average (DJIA) ended the week with a loss of 7.86%, while the S&P 500 (SPX) dropped by 9.08%. The tech benchmarks Nasdaq Composite (NDAQ) and Nasdaq-100 (NDX) tumbled by 10.02% and 9.77%, respectively.
Last week delivered a sharp jolt to financial markets. Major indices plunged on Thursday after President Donald Trump introduced “reciprocal” tariffs that came in far steeper than expected. While the baseline rate is 10%, some countries are facing significantly higher levels – China at 54%, Vietnam at 46%, and the EU at a comparatively lighter 20%. Volatility has exploded as rattled investors scrambled to make sense of the escalating trade conflict.
Still, there was some hope left in the markets on that day, with some stocks – mostly across defensive industries – finishing in the green and individual investor money flowing into stocks in a historic “buy-the-dip” move. According to JPMorgan data, retail investors bought a net of $4.7 billion in stocks on Thursday, the highest level over the past decade, picking up tech stocks across all cap sizes along with S&P stocks and ETFs.
However, all hope was abandoned on Friday after China matched the Trump administration’s 34% retaliatory tariff on imports with one of its own, signaling that the trade war is no longer theoretical – it is on with a vengeance, and markets need to adjust to the new reality. However, with America’s tariff levels at their highest in decades, and their widest ever, this adjustment looks problematic at best, since the U.S., and global economy in general, is now in uncharted territory.
Adding fuel to the fire, Federal Reserve Chair Jerome Powell said that Trump’s tariff policy is “significantly larger than expected” and will have a more profound impact on economic growth, unemployment, and inflation than initially anticipated.
Despite the grim message, Powell continued to claim it is too soon for the central bank to decide on policy steps to counter the tariff hit to the economy. There is a rational reason behind his unwillingness to rush in and cut interest rates, as inflation is proving to be stickier than expected even before the tariff blows have any effect on prices. While “soft” data, including PMIs and consumer sentiment surveys, continues to worsen, the “hard” data, such as March payrolls, is still solid, muddying the picture for the Fed. However, there is a notable chance that when “hard” data points downwards, it will be too late, and policymakers will be behind the curve again, amplifying the economic damage.
Fears of a painful mix of recession and stubborn inflation surged after Powell’s speech, pushing Wall Street’s fear gauge to its highest level in five years. Shell-shocked retail investors joined institutional ones in a broad sell-off, which sent the blue-chip DJIA deep into correction. The S&P 500 tumbled further toward the bear-market threshold of minus 20% from its high, while both Nasdaq indexes fell into the grip of a bear. The epic two-day rout in stocks wiped out $6.6 trillion in market value.
Between Trump’s decisiveness and the Fed’s hesitancy, the journey into the economic unknown may mean even more market pain. Meanwhile, the Q1 2025 earnings season begins this week, with some of the largest banks and financial companies set to report results on Friday. With uncertainty at its highest level since the onset of Covid-19, past performance may carry less weight than forward guidance – assuming companies can offer any coherent outlook at all.
The brutal sell-off pushed the S&P 500 trailing twelve-month P/E ratio slightly below its 10-year average, making stocks look cheap versus their recent history. However, that multiple averaged 15.5 during recessions over the past 70 years – meaning that if President Trump’s tariffs drag the U.S. economy into a recession, valuations have much further to fall. In short, this is probably not the bottom for stocks.
1
1
1
This Week’s Quality Dividend Stock Idea
Steel Dynamics (STLD) is a leading American steel producer and metal recycler, known for its vertically integrated operations spanning steel production, fabrication, and raw material sourcing. Based in Indiana, the company serves various end markets through its Steel, Metals Recycling, and Steel Fabrication segments. With a focus on efficiency and sustainability, Steel Dynamics maintains a national footprint while continuing to expand its value-added product offerings.
1
Forging Success
Founded by three former Nucor executives with $370 million in funding, Steel Dynamics began operations in 1996 with the launch of its Butler, Indiana, flat-roll steel mill. The company utilized electric arc furnace (EAF) technology to produce steel from recycled scrap, and quickly gained momentum, achieving profitability by 1997. This early success set the stage for an ambitious expansion strategy.
During the early 2000s, Steel Dynamics grew through a combination of facility developments and strategic acquisitions. It constructed additional EAF mills in Indiana, strengthening its production capacity. In 2006, the acquisition of Roanoke Electric Steel diversified its product offerings to include specialty steels and expanded its presence in steel fabrication. A year later, the company further solidified its position in the industry with the acquisition of OmniSource Corp., establishing a robust metals recycling platform. This move secured a steady supply of high-quality scrap, enhancing cost efficiency and vertical integration.
Today, Steel Dynamics is one of the largest U.S. steel producers with a diversified portfolio spanning steelmaking, fabrication, and recycling. With a market capitalization of about $16 billion and annual revenues exceeding $17 billion, STLD ranks #221 on the Fortune 500 list.
1
Strategic Growth
Steel Dynamics’ acquisition strategy has played a crucial role in its expansion, bolstering operational capacity and strengthening its market position. A key milestone came in 2014 with the acquisition of Severstal Columbus, which increased the company’s annual steel shipping capacity by 40% to 11 million tons. This move not only expanded its footprint in the flat-roll steel market but also enhanced economies of scale and profitability through a more diversified product portfolio.
Building on this momentum, Steel Dynamics acquired United Steel Supply in 2019, gaining access to a broader customer base. As a leading distributor of painted Galvalume flat-roll steel, United Steel Supply enabled the company to reach customers who typically do not buy directly from steel producers. This acquisition also reinforced Steel Dynamics’ ability to drive growth in high-margin product segments by leveraging its manufacturing expertise alongside a well-established distribution network.
In 2020, the company completed its acquisition of Zimmer S.A. de C.V., a Mexican ferrous and nonferrous recycler. The deal was strategically aimed at securing a cost-efficient scrap supply for the Sinton, Texas, flat-roll steel mill, which began operations in 2021. The acquisition also expanded Steel Dynamics’ presence in the Mexican market, strengthening its raw material procurement network and supporting long-term growth in the region.
In 2022, Steel Dynamics acquired a 45% minority interest in New Process Steel, expanding its downstream capabilities and reinforcing its position in steel distribution and supply-chain services. That same year, the company announced the acquisition of ROCA ACERO S.A. de C.V., a Mexican scrap metals recycler, further strengthening its raw material network and deepening its footprint in the Mexican market. These moves reflect a continued focus on vertical integration and regional growth.
1
Steel Advantage
Steel Dynamics operates a vertically integrated business model that spans steel production, recycling of ferrous and non-ferrous metals, and steel fabrication, allowing it to capture revenue across multiple stages of the value chain. With one of the most diversified and high-margin product offerings in the domestic steel industry, STLD has sustained profitable growth by expanding its value-added product portfolio, which now accounts for over 65% of its steel and steel fabrication sales.
Strategic geographic positioning further strengthens STLD’s competitive advantage. Its steelmaking facilities are located near sustainable scrap metal sources and key customer bases, reducing freight costs and ensuring timely deliveries. This operational efficiency enhances customer relationships by offering shorter lead times and consistent service.
STLD’s operations are divided into four core segments. This includes steel operations, metal recycling steel fabrication, and aluminum operations. Its steel operations utilizes electric arc furnaces (EAFs) to produce cost-efficient steel. It manufactures a wide range of products, including flat-rolled and structural steel, with nearly two-thirds classified as value-added offerings such as coated and cold-rolled steel, which enjoy higher margins.
Through its Metals Recycling operations, STLD processes ferrous and nonferrous scrap metals via its OmniSource subsidiary, operating approximately 70 facilities. This segment ensures a steady supply of recycled materials for its EAF-based steelmaking, reducing dependence on external raw materials like iron ore while maintaining cost efficiency. The Sinton flat-roll mill in Texas is operating above 90% capacity, with plans to reach full profitability in 2025, serving underserved markets in the Southwest U.S. and Mexico.
In the Steel Fabrication segment, the company produces structural components such as steel joists and decks for construction projects, further diversifying its revenue streams. This vertical integration across the steel value chain strengthens STLD’s market positioning and enhances profitability.
Steel Dynamics’ aluminum operations include a recycled aluminum flat-rolled mill in Columbus, Mississippi, along with two satellite slab centers in Arizona and Central Mexico. The flat-rolled mill, a joint venture with Unity Aluminum, in which STLD holds a 94.4% equity stake, is expected to begin operations in mid-2025, with the Mexico facility launching in late 2024.
STLD’s strategic market positioning, particularly in non-automotive-coated steel, enables it to benefit from trade measures aimed at reducing steel imports. As tariffs make foreign steel more expensive, domestic producers like STLD stand to gain from higher pricing and demand.
Industry conditions for 2025 appear favorable, with stabilized steel pricing and steady demand, particularly for lower-carbon, U.S.-produced steel. Factors such as manufacturing onshoring, infrastructure investments, and trade actions to curb unfairly traded imports are expected to support the domestic steel market.
1
Steel Momentum
Over the past half decade, Steel Dynamics has demonstrated impressive growth, with revenues and earnings expanding at a CAGR of 10.9% and 26.5%, respectively. This momentum has been driven by strong demand across key sectors such as construction, automotive, industrial, and energy, coupled with the company’s strategic focus on value-added steel products and operational efficiency.
However, in the fourth quarter, STLD faced challenges as revenues declined 8.5% year-over-year to $3.8 billion, falling short of consensus estimates of $3.96 billion. Meanwhile, the company’s EPS dropped 48.3% year-over-year to $1.36, though it still managed to surpass analysts’ expectations of $1.28. The revenue decline was largely attributed to a significant drop in average realized pricing for steel products, leading to reduced margins. Seasonality also played a role, as lower shipments in the quarter reflected typical fluctuations in demand, especially within construction and industrial activities.
Despite these headwinds, STLD achieved near-record annual steel shipments of 12.7 million tons in 2024. The company also reclassified certain aluminum operations from its Metals Recycling segment to its newly established Aluminum segment, impacting historical revenue and operating income.
Looking ahead to the first quarter of 2025, STLD expects EPS to be around $1.38 at the midpoint, compared to $3.67 per share in the prior-year quarter. On a sequential basis, steel operations are expected to remain profitable in Q1, driven by higher shipments despite some margin compression.
Additionally, STLD’s four new value-added flat-rolled steel coating lines, launched in 2024, are expected to reach full capacity in 2025, adding 1.1 million tons of higher-margin products. Meanwhile, the aluminum business is advancing, with initial industrial and beverage can processing in January 2025 and commercial shipments anticipated by June. The aluminum segment is expected to be EBITDA-positive by late 2025, contributing to long-term earnings growth. In 2024, the Aluminum Operations segment saw an 11% increase in net sales, indicating a distinct separation and focus on aluminum as a standalone segment.
1
Financial Resilience
Financially, STLD remains strong, with a differentiated circular business model and a highly variable low-cost structure. At year-end, the company had liquidity of $2.2 billion, including $1 billion in cash and investments and a fully available $1.2 billion unsecured revolving line of credit. Its net debt-to-EBITDA ratio of 0.9x is significantly below the industry median of 2.8x. Over the past five years, STLD has reduced its debt-to-equity ratio from 67.3% to 36.1%, with operating cash flows comfortably covering its debt obligations.
Further strengthening its financial position, STLD recently completed a $1 billion notes offering, consisting of $600 million in 5.25% Notes due in 2035 and $400 million in 5.75% Notes due in 2055. The proceeds are intended for general corporate purposes, including potential debt repayment, such as the $400 million in 2.4% Senior Notes due in June 2025. Major credit agencies have affirmed STLD’s stability, with ratings of “BBB” from S&P Global and “Baa2” from Moody’s.
In 2024, the company’s capex stood at $1.9 billion, with about 70% allocated to aluminum flat-rolled investments. Some projects, including $200 million in aluminum spending, shifted from Q4 2024 to 2025, raising the full-year investment estimate from the initial $750 million–$800 million range to nearly $1 billion. However, this represents a timing shift rather than an increase in total expenditures.
STLD has consistently delivered strong returns, with a three-year after-tax return on invested capital of 23%, ranking among the top 10% in the steel industry. Its return on assets (ROA) and return on equity (ROE) are also within the industry’s top tier.
1
Dividend Strength
Steel Dynamics has established itself as a strong dividend contender, consistently paying dividends for the past 12 years and increasing them annually for the last decade. However, the company refrained from raising dividends in FY15 and FY16 due to significant volatility in the steel industry, which saw fluctuating prices and demand. Over the past 10 years, STLD has increased its dividend at an annual rate of 14.2%. In February 2025, the company announced a 9% increase in its quarterly dividend, raising it to $0.50 per share, up from $0.46 in 2024.
The company maintains a prudent capital allocation strategy, distributing 19.2% of its earnings as dividends. Currently, STLD offers a dividend yield of 1.62%, slightly below the sector average of 1.75%. Despite the moderate yield, the company’s robust cash flow generation supports the sustainability of its dividends. Over the past five years, STLD’s free cash flow profile has transformed, with its annual average adjusted free cash flow more than tripling from approximately $540 million to nearly $3 billion, further boosting its dividend sustainability. Additionally, with a low payout ratio, STLD’s dividend payments remain well covered by earnings.
At the end of 2024, Steel Dynamics had $194 million remaining under its $1.5 billion buyback authorization from 2023. In February 2025, the company announced a new $1.5 billion share repurchase program, effective immediately, reinforcing its commitment to shareholder returns. As of March 12, 2025, STLD had repurchased $191 million worth of common stock in the first quarter. This followed approximately $1.2 billion in buybacks during FY 2024, representing about 6% of STLD’s outstanding shares. These actions underscore the company’s strong balance sheet, steady cash flow, and management’s confidence in long-term value creation.
Over the past year, STLD’s stock has declined by 26.1%, pressured by falling steel prices, profitability concerns, and investor uncertainty surrounding economic conditions and potential trade policy changes. However, Wall Street analysts argue that these concerns are overblown, projecting an upside of 37.6% over the next 12 months. Some analysts are forecasting a 51.1% upside due to STLD’s well-positioned product portfolio, which could benefit from expanded tariffs. Supporting this bullish outlook, discounted cash flow (DCF) valuation models suggest the stock remains undervalued by approximately 74.1%, reinforcing its appeal as a long-term investment opportunity.
1
Investing Takeaway
Steel Dynamics has established itself as a reliable dividend payer, with a decade-long track record of increasing its dividend annually. The company’s strong cash flow generation ensures the sustainability of its dividends. Despite near-term headwinds, STLD’s diversified portfolio, operational efficiency, and disciplined capital allocation make it an attractive option for income-focused investors seeking dividend growth with long-term upside potential.
1
Dividend Investor Portfolio
1
Portfolio News
▣ Amgen (AMGN) has announced that the U.S. FDA has approved Uplizna, the first and only treatment for adults with IgG4-related disease (IgG4-RD), a chronic, immune-mediated condition affecting multiple organs. The drug received a Breakthrough Therapy Designation, highlighting its potential and the high unmet medical need in treating this serious illness.
▣ BlackRock (BLK) is expected to announce its Q1 results on April 11. Wall Street analysts expect Q1 earnings of $10.52 per share, compared to Q4 adjusted EPS of $11.93 while revenues are estimated to be $5.34 billion, down from $5.7 billion in the fourth quarter.
▣ JPMorgan (JPM) is expected to announce its Q1 results on April 11. The bank has guided for net interest income (NII) of $94 billion in FY25. In Q1, analysts expect EPS of $4.63, a sequential decline from $4.81 in the fourth quarter. Revenue is estimated at $43.93 billion, slightly up from $43.7 billion in Q4.
▣ IBM (IBM) has been selected by the U.S. government to participate in a multi-year program assessing the viability of quantum computing. The Defense Advanced Research Projects Agency (DARPA), a research arm of the U.S. Department of Defense, unveiled the 15 finalists for its Quantum Benchmarking Initiative. The program’s goal is to determine whether any quantum-computing approach can achieve utility-scale operations by 2033, and if it is economically viable to scale quantum-computing technology.
▣ Qualcomm (QCOM) is considering the acquisition of Alphawave, a semiconductor company listed on the London Stock Exchange. Qualcomm has until April 29 to decide on a potential offer under UK takeover rules, with no guarantee that it will proceed further. Alphawave is exploring a sale after its discussions failed with Arm. In another development, QCOM acquired MovianAI Artificial Intelligence Application and Research, the former generative AI division of VinAI Application and Research, and a part of the Vingroup ecosystem for an undisclosed amount.
1.
Recent Trades
None at the moment, although we are considering adding a stock to our portfolio when the market conditions allow for an attractive entry point. Stay tuned.
1
1
Portfolio Attributes
| Dividend Portfolio Yield |
Expected Dividend Growth | Expected Annual Income |
| 3.99% | +8.04% | $5,924.69 |
| Yield-on-Cost Adjusted, Weighted |
Average Analyst 12-Month Growth Outlook | 10K Per Stock at the Time of Purchase |
Current Portfolio
| Name | EX-Dividend Date | Payment Date | Yield on Cost | Annual DPS |
| Automatic Data Processing (ADP) | Jun 12, 2025 | Jul 01, 2025 | 2.46% | $6.16 |
| Allianz SE ADR (ALIZY) | May 09, 2025 | May 28, 2025 | 6.09% | $1.52 |
| Amgen (AMGN) | May 16, 2025 | Jun 09, 2025 | 3.27% | $9.52 |
| BlackRock (BLK) | Jun 09, 2025 | Jun 26, 2025 | 2.61% | $20.84 |
| Bank of Nova Scotia (BNS) | Jul 03, 2025 | Jul 29, 2025 | 5.98% | $2.97 |
| EOG Resources (EOG) | Apr 17, 2025 | Apr 30, 2025 | 3.06% | $3.90 |
| IBM (IBM) | May 09, 2025 | Jun 10, 2025 | 3.13% | $6.68 |
| JPMorgan Chase (JPM) | Jul 08, 2025 | Jul 31, 2025 | 3.2% | $5.60 |
| Kroger (KR) | May 15, 2025 | Jun 02, 2025 | 2.82% | $1.28 |
| LyondellBasell (LYB) | Jun 03, 2025 | Jun 10, 2025 | 5.62% | $5.36 |
| PepsiCo (PEP) | Jun 09, 2025 | Jun 26, 2025 | 3.64% | $5.44 |
| Philip Morris (PM) | Jun 23, 2025 | Jul 17, 2025 | 6.06% | $5.40 |
| Qualcomm (QCOM) | May 29, 2025 | Jun 26, 2025 | 2.36% | $3.56 |
| VICI Properties (VICI) | Jun 18, 2025 | Jul 03, 2025 | 5.22% | $1.73 |
| ExxonMobil (XOM) | May 14, 2025 | Jun 10, 2025 | 3.64% | $3.96 |
1
1
1
Click here for more stock market analysis from TipRanks Macro & Markets research analyst Yulia Vaiman
1
Disclaimer
The information contained in this article represents the views and opinions of the writer only, and not the views or opinions of TipRanks or its affiliates and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy, or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment, and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices, or performance.
