GGB - Gerdau S.A.: Assessing If Storm Clouds Are Beginning To Form (Technical Analysis)

2024-01-31 16:12:04 ET

Summary

• Gerdau's dividend yield has decreased to 7.43% and the buyback program has ended, leading to diminished shareholder returns.
• Adverse macro trends and increased competition in the Brazilian market pose significant challenges for Gerdau's profitability.
• Gerdau's technical charts indicate potential weakness in the stock in the near future, despite remaining in a long-term bull market.

Intro

We wrote about Gerdau S.A. ( GGB ) back in February of last year when we stated that the Brazilian steel production company remained a solid income play. The dividend yield topped 10% at the time, and operating cash flow of $600+ million in the third quarter of 2022 ensured the payout was well covered on a cash-flow basis. Gerdau's impressive cash-flow generation also enabled the company to buy back its stock. Sustained buybacks over time ($112 million of stock was bought back in Q3 of fiscal 2022) help put a floor in the stock (due to fewer shares being outstanding) and also place less burden on the dividend, which opens up possibilities for the payout (per share) to be increased over time....

For further details see: