The Evraz 12.3% yield may look unmissable, but here’s what I’d do today

first_img Rachael FitzGerald-Finch | Tuesday, 10th November, 2020 | More on: EVR Image source: Getty Images. Rachael FitzGerald-Finch has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! The Evraz 12.3% yield may look unmissable, but here’s what I’d do today Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. “This Stock Could Be Like Buying Amazon in 1997” I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.center_img I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. Simply click below to discover how you can take advantage of this. Our 6 ‘Best Buys Now’ Shares Jackpot? A FTSE 100 stock with a whopping 12.3% dividend yield. To top it off, shares in Evraz (LSE: EVR) are climbing. Currently selling around 381p, they’ve provided a 50% return over the last six months.But I’m not fooled by the high numbers, because things are not all that they seem with the Evraz share price.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…The uncertain market for steel Admittedly, Evraz is one of the world’s biggest steel producers. The integrated nature of its business means it’s involved in all aspects of steel production from mining coal and iron ore to selling steel products. This enables it to deal with the cyclical nature of the steel industry more effectively than operating in only one part of it.However, Evraz is mainly reliant on demand for its steel in Russia, the rest of Eastern Europe and North America. In all three regions, demand for its products has dropped. Consequently, operating profits plunged by 38% in its 2019 results. And this was before the global pandemic-related economic shutdown pulled its share price further into the depths.Indeed, I suspect it’ll be a while before Evraz sees demand significantly improving again. Moreover, the bullish period around 2018 looks like an outlier, correlating with high steel and vanadium prices.      Evraz share price fundamentalsIncredibly, the 12.3% forward dividend yield on offer is what remains after Evraz’s dividend cut in August following a poor first half-year performance. This was blamed on “restrictive“ government measures being imposed in many of its geographic markets, causing steel prices to drop. To help cash flow, it also reduced it payouts from four times per year to two.Although the dividend yield remains relatively high, the recent cut appears to reflect the current state of the business. Declining revenues have resulted in Evraz upping its levels of debt to see it through the recent downturn. Moreover, even with the cyclical nature of the steel industry, an 80% gross gearing ratio is substantial. It illustrates the large amount of debt on the balance sheet as a percentage of shareholder funds. If the downturn continues, this may increase even more.However, the business coverts profits to cash efficiently. But it appears that Evraz uses debt, in addition to the hard cash generated, to fund its whopping dividend. Moreover, I think the business is used as a cash-cow for its shareholders. In the short term, this could benefit an investor, but it’s not a long-term wealth-building strategy for either the business or a shareholder.In summary    To look at its last financial year in isolation, Evraz appears to be doing quite well. However, it’s the general trend of the business over the last few years that concerns me. Despite the cyclical nature of steel production, as I said, the most recent peaks appear to be outliers.In addition, its debt pile is a concern and I’m not convinced it will manage to hold its showboating dividend at current levels. If demand for its products doesn’t improve, limited revenues mean the debt will have to be serviced by shareholders. Consequently, I’m looking out for less risky stocks than Evraz to add to my portfolio.  Enter Your Email Address See all posts by Rachael FitzGerald-Finchlast_img

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