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Cleveland-Cliffs Plans to Continue Buying Back Stock

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Significant turnaround

Since Cleveland-Cliffs’ (CLF) new management took over in August 2014, the company has turned around for the better. After taking care of the company’s debt, management has now started giving back cash to shareholders.

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Stock buyback

During its third-quarter 2018 results, the company announced that it would proceed with a dividend of $0.20 per year, which it expects to maintain throughout the cycle. CLF also announced a share buyback program in the fourth quarter of 2018. During the first quarter, CLF repurchased 11.5 million shares at $124 million and increased its share repurchase authorization from $200 million to $300 million.

CLF is not alone in announcing buybacks. Due to tariff windfall, many other US steelmakers have announced similar measures. Nucor (NUE) and Steel Dynamics (STLD) announced share buyback programs earlier in 2018, and U.S. Steel Corporation (X) announced a $300 million share buyback program during its third-quarter 2018 earnings release.

Financial priorities

During Cleveland-Cliffs’ Q1 conference call, CEO Lourenco Goncalves stated that “if the market continues to deny value to our equity, the market in the stock exchange every day, I’m going to continue to buy back stock.”

The company’s next priorities are buying back bonds, repaying debt, and HBI (hot-briquetted iron), though the company will only start thinking about another HBI plant when the first plant is up and running. It plans to wait for a US (DIA) (SPY) shortage to start building another HBI plant.

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