The BlueScope Steel Ltd (ASX: BSL) share price has responded positively to news of a special dividend.
BlueScope is a major steel manufacturer with operations in North America, Australia and Asia Pacific.
BlueScope special dividend
The board of directors of BlueScope have announced it will send $438 million of surplus cash to shareholders through an unfranked special dividend of $1 per share.
This money has come about from a few different sources.
There was the sale of BlueScope’s 50% interest in the Tata BlueScope joint venture for $167 million, the agreement to sell 33 hectares of land at West Dapto for $76 million and the working capital release of around $200 million over FY25 and FY26 for residual projects in the BlueScope Properties Group.
BlueScope’s board decided to return this cash via an unfranked special dividend because an on-market share buyback isn’t available in light of the potential takeover.
The board said the dividend is part of its “established capital management framework and is independent of any prior or potential future proposals for the company.”
Future payout intentions
BlueScope also said that in addition to the recent cash-generating initiatives, its free cash flow generation is set to ramp-up over the next 12 to 18 months.
The cash boost will occur as it works through the balance of its major investment program, with a reduction in capital expenditure of at least $500 million in FY27 compared to FY26.
The ASX steel share noted it will remain disciplined and returns-focused, balancing shareholder returns and long-term profitable growth. It intends to pay at least 50% of earned free cashflow to shareholders in the form of consistent dividends and share buybacks.
Management commentary
BlueScope Managing Director and CEO Mark Vassella said:
This special dividend demonstrates BlueScope’s ability to generate and distribute returns to its shareholders. With a clear line of sight to the completion of our current significant capital investment program, BlueScope is positioned to not only return to the robust cash generation it has been known for, but to strengthen it further with the enhanced earnings of the business. The board will continue to carefully balance investment in growth with shareholders returns as cash flows build.
Final thoughts on the special dividend for BlueScope share owners
Regardless of how the takeover plays out, shareholders getting cash is usually a pleasing development.
The payout represents a dividend yield of 3.3% at the current BlueScope Steel share price, so it’s a sizeable one-off payment and juices the cash returns that investors have seen over the past 12 months.
It has already risen 0.5% in response to the news, so I wouldn’t buy it purely based on this news, but it’s a positive development.
