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TFSA Income Investors: This Under-the-Radar Canadian Stock Yields 5.8%

Canadian income investors are searching for top dividend stocks to hold inside their TFSA portfolios.

The strategy makes sense, as the full value of the distributions can go straight into your pocket. That’s right; you don’t have to set some aside for the taxman.

Many investors automatically go with the big names they see talked about on their favourite business programs, but there are a number of other stocks in the Canadian market that provide attractive and reliable yield that don’t get the same kind of media attention.

Let’s take a look at Russel Metals Inc. (TSX:RUS) to see why it might be an interesting pick.

Operations

Russel Metals is one of the largest metals distribution companies in North America with operations across Canada and throughout the United States.

The company’s core segments include metal service centres, steel distributors, and energy products.

The metals service centres provide processing and distribution services to 43,000 end users through 50 Canadian locations and 14 U.S. sites.

On the distributor side, the company sells steel in large volumes to other steel service centres and equipment manufacturers.

Russel made a big move into the energy sector shortly before the oil rout began, and that resulted in some pain for shareholders through the second half of 2014 and all of 2015.

Investors who had the courage to get in at the low near $15 per share have done very well. The stock is up more than 70%, and Russel has maintained the dividend through the downturn.

Improving numbers

The company reported solid Q2 2017 numbers, with earnings per share of $0.52 compared to $0.27 in the same period last year.

Higher selling prices and better volumes in the energy products and steel distributors segments were primarily responsible for the better results.

For the first half of 2017, earnings came in at $1 per share compared to $0.39 per share in the first six months of 2016.

Attractive dividend

Russel pays a quarterly dividend of $0.38 per share. At the time of writing, the stock provides a yield of 5.8%.

Should you buy?

This stock can be volatile, as the company’s profitability is determined by the ups and downs of the steel industry. Trade sanctions, international demand, iron ore prices, scrap steel prices, and product availability all affect steel prices.

Economic cycles also have an impact on results, and downturns in the manufacturing, construction, or energy sectors tend to be negative.

So, you have to keep this in mind when considering the stock.

Overall, Russel is significant player in the industry and is run by a strong management team.

Investors should find comfort in the fact that the company maintained the dividend through the recent downturn in the energy sector. Russel is in better shape now, so the payout should be safe.

If you can handle a bit of volatility from time to time, it might be worth adding a bit of this stock to your income portfolio.

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Fool contributor Andrew Walker has no position in any stocks mentioned.

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