A Dividend King Stock Down 40%: Nucor Offers a Long-Term Opportunity
Finding dependable dividend stocks in highly cyclical industries is a challenge
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Intro
💡 Invest in companies you believe in - W. Buffett
Finding dependable dividend stocks in highly cyclical industries is a challenge—but not impossible.
Companies like ExxonMobil from the energy sector and Nucor (NYSE: NUE), a Dividend King from the steel industry, exemplify how it can be done. With a roughly 40% decline from its peak, Nucor presents an intriguing buying opportunity for long-term investors.
History of the Company
Nucor Corporation began in 1905 as Reo Motor Company. After financial struggles and a reorganization, it became Nuclear Corporation of America in the 1950s, focusing on nuclear instruments. In the 1960s, under F. Kenneth Iverson, it pivoted to steel production with its first mini-mill in South Carolina, pioneering efficient, scrap-based steelmaking.
Renamed Nucor Corporation in 1972, it has since become the largest steel producer in the U.S. and North America's top recycler, known for its sustainable practices, decentralized management, and employee-focused culture.
A Proven Dividend King 👑
Nucor has a 52 year streak of annual dividend increases, earning it the prestigious Dividend King status. This achievement reflects the company's operational strength and long-term commitment to shareholder value. Few companies achieve such consistency, especially in cyclical sectors like steel.
Key Institutional Investors in Nucor Corporation (NUE)
As of 2024, major institutional investors hold significant stakes in Nucor Corporation, influencing its strategic decisions and market performance.
The Vanguard Group holds 8.5% of shares and increased its stake by 1.2 million shares in Q3 2024.
BlackRock, Inc. controls 7.8% with no recent changes.
State Street Corporation owns 5.1%, reducing its position by 400,000 shares in the latest quarter.
What Makes Nucor Stand Out?
Nucor (NYSE: NUE)
Financial Score: 97 / 99 ⭐️⭐️⭐️⭐️⭐️
Industry: Basic Materials / Steel
Dividend increase - 52 Years
👉 Learn more about Financial Score
At its core, Nucor is a steel producer. However, it employs a more flexible electric arc mini-mill process rather than the traditional blast furnace method used by many competitors. This approach offers several advantages:
Environmental Benefits: Mini-mills rely heavily on scrap metal instead of raw iron ore and coal.
Resilience Across Cycles: Electric arc mini-mills generate more consistent margins across the steel cycle, while blast furnaces thrive in booms but struggle during downturns.
Additionally, Nucor has diversified its portfolio by expanding into specialty steel products, such as industrial garage doors and data center racks. These higher-margin products are less correlated to steel industry cycles, further stabilizing profitability.
Nucor Corp - Quick MaxDividends Team Overview
🟢 The latest data suggests that the company is currently profitable.
🟢 Sales are stable and growing, business is developing
🟢 The company's operating profit has continued to grow in recent years, which indicates the stability of its success and management efficiency.
🟢 The dynamics of earnings per share are positive, the company shows good pace and stability in terms of profitability
🟢 The company demonstrates a high degree of sustainability and provides stable income.Financial Statement
If you want to stay on top of your portfolio's health, don't forget to check in on the financials of the companies you've invested in. The better shape they’re in, the better your results will be. Keep an eye on their quarterly and annual reports to see how they're performing.
Here is a quick dive into Nucor Corporation financials over last years
The strongest and most stable companies tend to have a Financial Score of 80+, with the very best ones hitting 90+. If you see that score start to dip below 80, that’s your cue to consider jumping ship before things get worse.
👉 Learn More about Financial Score
Our Paid Members get access to a curated watchlist of 19,000 companies worldwide, all scored by our team on a regular basis. Companies like Nucor Corp are on that list, too.
Recent Nucor Financial Performance (2024)
In the third quarter of 2024, Nucor recorded consolidated net sales of $7.44 billion, reflecting a 15% decline from $8.78 billion in the same quarter of 2023. Net earnings attributable to Nucor stockholders totaled $249.9 million, or $1.05 per diluted share, a significant drop from $1.14 billion, or $4.57 per diluted share, in Q3 2023.
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Dividend Kings are the crème de la crème of dividend growers and should be top of mind for any dividend investor who puts income stability above all else. With 50+ years of consecutive increasing distributions, Dividend Kings have a great track record that adds a layer of stability in an otherwise uncertain market environment.
25+ consecutive years of dividend increases. They are the ‘best of the best’ dividend growth stocks. The Dividend Aristocrats have a long history of outperforming the market.
Why Now Could Be a Buying Opportunity?
Nucor's current 40% decline aligns with past sell-offs in its history. Despite cyclical volatility, its stock has consistently trended higher over the long term.
Smart Growth Strategy
Nucor's management excels at leveraging downturns as opportunities to invest in assets and acquisitions. This strategy not only positions the company for future growth but also takes advantage of lower prices during market slumps.
Moreover
Nucor's financial health appears solid. The company's debt-to-equity ratio is at a manageable 0.33, down from 0.6 a decade ago. Even after issuing reduced Q4 2024 earnings guidance, Nucor remains profitable—unlike some competitors that are currently operating at a loss.
Competitors
1. Steel Dynamics (NASDAQ: STLD)
Financial Score: 98 / 99
Industry: Basic Materials / Steel
Dividend increase - 12 Years
Isn't just churning out steel; they're also rolling out solid dividends. With a 1.57% dividend yield and an annual payout of $1.84 per share, they've upped their dividends for 12 straight years.
Over the past three years, they've cranked up dividends by an average of 19.35% annually, all while keeping a lean 16.65% payout ratio. That's a smart balance between rewarding investors and fueling growth.
2. Reliance Steel & Aluminum Co. (NYSE: RS)
Financial Score: 98 / 99
Industry: Basic Materials / Steel
Dividend increase - 10 Years
The company offers a dividend of $4.40 per share, yielding 1.64%. Over the past five years, Reliance has increased its dividends by 100%, while maintaining a payout ratio of 24.02%, demonstrating a balanced approach between rewarding shareholders and investing in growth.
With a product range of over 100,000 metal items, Reliance serves industries such as aerospace, construction, and manufacturing. This strategy not only ensures steady growth but also makes the company an attractive option for investors seeking both reliability and profit potential.
Final Thoughts: Should You Buy Nucor?
Nucor combines the stability of a Dividend King with the inherent risks of a cyclical industry. While its dividend yield of 3.2% may not be high, the current pullback provides a potential entry point for long-term investors.
Be prepared to weather industry downturns, but rest assured that Nucor’s proven business model and growing dividends can help you navigate the challenges.
Current Market Value
Undervalued \ Overvalued \ Fairly valued
Compare competitor companies` P/E ratios to find out if the stocks you`re looking to trade are overvalued. We take the P/E average among competitors.
If a company`s current P/E is 20% or more lower than its competitor`s average, the company is considered undervalued. If it is higher by 20% or more, it is overvalued.
P/E ratio is calculated by dividing the market value per share by the earnings per share (EPS).
🟢 Undervalued
Compared to competitors and companies with business in this industry, the company is fairly valued. A price reduction of 15-20% would be a great investment point.
Analysts Consensus
According to recent analyst projections, Nucor's stock is considered undervalued. Price estimates suggest a potential upside of approximately 30% to 35% from current levels, with a median target price of around $156 per share.
Ideally, we would aim to see current dividend yield above the average, providing a robust margin of safety for a potential purchase.
To your wealth, MaxDividends Team
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