On Tuesday, Steel Dynamics
Well, yesterday was your lucky day. Steel Dynamics, denizen of the brutal American steel industry, in which nothing is certain save that business is cyclical and everyone is doomed to bankruptcy in the end (it seems like that most years), announced it is instituting a dividend.
That's right. And it's not a one-time dividend that the company returns to shareholders because it doesn't know what else to do with it (such as Deb Shops
So Steel Dynamics' dividend creation was a pretty clear signal of what to expect come Tuesday. Clear enough to cause the company's stock to jump 10% in two days. I may be wrong, but it seems unlikely that the Steel Dynamics buyers were Motley Fool Income Investor subscribers, attracted by the size of the new dividend (1%). Dividend tax cut or not, you need both a 1% dividend and a strong pot of Starbucks
Already in May, Steel Dynamics predicted it would earn GAAP profits of $1 per diluted share for the second quarter of 2004 (roughly 10 times what they made last year). But more important, its institution of a regular dividend suggests that Steel Dynamics became free cash flow positive this quarter. Out of several other steel companies that I follow more or less regularly, only one is currently free cash flow negative in the midst of today's profitable steel environment -- AK Steel
If my hypothesis proves correct, Steel Dynamics shareholders should have a real reason to smile come Tuesday.
Fool contributor Rich Smith has no interest in any of the companies mentioned in this article.