AK Steel Holdings Corporation

Butler Works is located on 1,300 acres in western Pennsylvania, an hour drive north of Pittsburgh.

I was born and raised in a steel town. People graduated from my high school and drove down to the steel mill and got a job. Their parents did the same. They got a job, got married, raised a family, and bought a house and a car. Life was that simple. People thought that their way of life would never change. Then came the late 1970s when they started shutting down the steel mills in the Pittsburgh area. We went from 33 mills to 3 in just a matter of 30 years.


But there are surviving steel mills in the United States that managed to recreate their business and specialize in steel products. One such company is called AK Steel Holdings Corporation (Stock Symbol: AKS on the New York Stock Exchange). AK Steel produces flat-rolled carbon, stainless and electrical steel products, as well as carbon and stainless tubular steel products, for automotive, appliance, construction and manufacturing markets.

The major plants and office locations are in Middletown, Coshocton, Mansfield, Walbridge and Zanesville, Ohio; Ashland, Kentucky; Rockport and Columbus, Indiana; and Butler, Pennsylvania.

AK Steel’s key customers are the major automakers, as well as key producers in the appliance, construction, manufacturing and electrical equipment industries.

AK Steel (NYSE: AKS) announced that its board of directors has declared a quarterly cash dividend of $0.05 per share of common stock, payable on June 8, 2012 to shareholders of record on May 15, 2012. If they pay 5 cents per quarter that will be 20 cents per year. With a current price of $7.14 (price as of 12:50 PM, April 25, 2012) that gives you a yield of 2.8%. That is not bad today for a stock.

However, I would buy the Ak Steel Corp 8.375% of Apr 1, 2022 bond. It is more secure than AK Common Stock. The bond is rated by Moody’s at B2 and Standard and Poor’s at BB-. The Cusip Number is 001546AM2. At this price of $976.40 for about 10 years, you the Income Investor makes out better than the stock speculator. In order for the stock speculator to do better the speculator must wait until the stock doubles in price and you the speculator sells at its doubling price.

If the bond is called early from April 1, 2017 (earliest that it can be called) to April 1, 2022, they must pay the investor $1,040 per bond.

If bought on Oct. 1, 2012 and kept until maturity, you the investor would get $711.88 in interest and $23.60 in bond appreciation for a total of $835.48 per bond. You the investor only paid $976.40 per bond.

Do you want to make more? Buy the bond before Oct. 1, 2012. This sounds good for someone with a self-directed IRA. Your profits in an IRA is tax deferred. Personally, I do not own this bond or its stock.