Last update on 2024-06-27

Nucor (NUE) - Dividend Analysis (Final Score: 6/8)

Nucor (NUE) - A Thorough Dividend Analysis with a Final Score of 6/8. Discover NUE's dividend performance, consistency, and financial stability.

Short Analysis - Dividend Score: 6

We're running Nucor (NUE) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield represents the ratio of a company's annual dividend compared to its share price. It's a crucial metric for investors seeking income through dividends. A higher yield indicates a better return on investment through dividends.

Nucor's current dividend yield of 1.1894% is significantly lower than the industry average of 2.98%. Historically, Nucor's dividend yield has experienced substantial fluctuations, peaking at 4.1342% in 2008 and bottoming at 0.898% in 2004. Recently, there's been a marked decline from 1.5249% in 2022 to the present 1.1894%. By contrast, the industry's yield showed a steadier, albeit increasing trend, with spikes around periods of market distress like 2008 and the recent couple of years. Nucor's lower yield isn't necessarily a negative indicator but reflects the company's robust stock price appreciation, closing at $174.04 in 2023, up from $131.81 in 2022. Nevertheless, for yield-focused investors, this lower dividend yield compared to the industry could be less attractive.

Average annual Growth Rate higher than 5% in the last 20 years?

The dividend growth rate measures the annualized percentage rate of growth of a company's dividend over a specified period of time. A higher growth rate than 5% indicates strong financial health and shareholder returns.

Analyzing Nucor's (NUE) dividend per share ratio from 2003 to 2023, we see varying percentages with significant growth in certain years and declines in others. Peaks such as 229.7872% in 2005 and lows like -26.178% in 2009 indicate significant volatility. Despite the inconsistencies, the average dividend ratio over the period sits at 20.3948%, substantially higher than the 5% criterion. This suggests that overall, Nucor has managed to grow its dividends impressively over the last 20 years, which is a positive sign for investors. Nucor's ability to raise its dividends considerably surpasses the traditional 5% benchmark, reflecting strong financial health and a commitment to returning value to its shareholders.

Average annual Payout Ratio lower than 65% in the last 20 years?

The Average Payout Ratio represents the portion of earnings paid out to shareholders as dividends. It is important to consider because a lower payout ratio indicates more earnings are retained for growth and stability, reducing the risk associated with dividend cuts.

Nucor’s Average Payout Ratio over the last 20 years is 53.82%, which is below the 65% threshold. However, the individual yearly values show significant volatility, including peaks above 100% and even a payout ratio of -151.21% in 2009. This trend indicates that although the long-term average is within a healthy range, Nucor has experienced periods of financial stress or uneven earnings. For 14 of the 21 years, the payout ratio remained below 65%, suggesting relative stability and capacity to pay dividends most of the time. Despite occasional spikes, the average falling below 65% favors Nucor’s ability to sustain its dividend payments in the long run.

Dividends Well Covered by Earnings?

Explaining why ensuring dividends are well covered by earnings is critical.

Dividends are typically paid out of a company's earnings. If a company's earnings per share (EPS) comfortably covers its dividend per share (DPS), it suggests that the company is generating enough profit to sustain its dividend payments without straining its financial resources. Conversely, if EPS does not cover DPS, it could be a red flag indicating potential financial instability or that the company might be relying on debt to fund its dividend payments, which is not sustainable in the long run.

Dividends Well Covered by Cash Flow?

Explain the criterion for Nucor (NUE) and why it is important to consider

Dividends well covered by cash flow. Cash flow coverage ratio is the measure of cash flow available to pay dividends. It's the proportion of free cash flow designated for dividends. A ratio of 1 indicates perfect coverage, suggesting dividends are fully covered by cash flow. Lower ratios signify potential issues in sustaining dividends solely from current cash flows, necessitating either borrowing or other sources. Continuous low or negative ratios are concerning and affect the company's stability and attractiveness to investors.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over the past 20 years

The dataset shows Nucor's dividends per share over the last 20 years. Analyzing them, the company did not experience a drop in dividends by more than 20% in any given year. For instance, even during 2008's financial crisis when many companies slashed dividends, Nucor's dividends only dropped from $2.44 in 2007 to $1.91 in 2008, a decline of approximately 21.31%. This resurgent stability is of paramount importance for income-seeking investors as it ensures a predictable and reliable income stream. Given the overall upward trend from $0.20 in 2003 to $2.07 in 2023, investors can be relatively confident in Nucor's commitment to rewarding its shareholders through consistent dividends.

Dividends Paid for Over 25 Years?

Analyzing whether a company has paid dividends consistently for over 25 years helps to understand its financial stability and shareholder commitment.

Nucor (NUE) has shown an impressive track record by paying dividends consistently for the past 25 years, indicating strong financial health and a commitment to returning value to shareholders. This trend is excellent for investors as it shows the company's ability to generate sure and predictable returns. Not only has Nucor maintained its dividend payouts, but the growth in dividend per share from $0.12 in 1998 to $2.07 in 2023 also highlights its growth prospects and profitability. This consistent performance is a strong indicator of financial stability and management's confidence in the company's future.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases refer to a company's consistent effort to buy back its own shares from the marketplace. This can indicate management's confidence in the company's future and its financial health.

Over the past 20 years, Nucor (NUE) displayed a pattern of reliable stock repurchases with significant reductions observed in several years. The total number of shares decreased from approximately 313.9 million in 2003 to 249.7 million in 2023. This reduction reflects an average repurchase trend of -1.0911%. It's notable that the company significantly repurchased shares in 2005, 2006, 2007, 2016, 2018, 2019, 2020, 2021, 2022, and 2023. This trend is favorable as it suggests that Nucor's management has consistently believed in the company's value, thus boosting shareholder value by reducing supply and potentially increasing stock prices. However, during economic downturns or financial strains, repurchases might be paused, affecting consistency.