We recently compiled a list of 10 Best Dividend Aristocrats According to Wall Street Analysts. In this article we are going to take a look at where Nucor Corporation (NYSE:NUE) stands against the other dividend aristocrats.

Shifts in investment trends have revealed new insights for investors in recent years. Certain times call for specific investments, and it’s often experienced investors who can spot these opportunities. However, it’s clear that the value of a good investment remains steady, even amidst ongoing changes. This is where the long-standing dividend aristocrats play a role. These companies are strong dividend payers, having raised their payouts for at least 25 consecutive years.

The extended periods of dividend increases have significantly boosted the impressive returns of these stocks over time. Since its inception in 2005, the Dividend Aristocrats Index has outperformed the broader market with lower volatility, according to a report by ProShares. In addition, these stocks demonstrated strong performance in all market conditions, capturing 90% of market gains while only experiencing 82% of market declines. Also read: 10 Best Dividend Aristocrats with Over 3% Yield.

Achieving 25 consecutive years of dividend growth is quite an accomplishment. Out of approximately 6,000 stocks listed on the NYSE and Nasdaq, only 67 are part of the prestigious Dividend Aristocrats index in 2024. This highlights that only a small number of companies have reached this milestone. Maintaining a record of annual dividend increases for 25 years means the company has managed to boost shareholder payouts through various challenges, including the dot-com bubble, the 2007 financial crisis, and the pandemic. This reflects a robust business model, strong cash flow visibility, and disciplined management of capital. Even dividend aristocrats can struggle with consistency, as we’ve seen recently. Companies like Walgreens and 3M were unable to sustain their decades-long dividend growth streaks and have been removed from the Dividend Aristocrats club this year. This highlights the importance of financial strength for dividend aristocrats. The Great Financial Crisis exposed the financial vulnerabilities of these dividend-growers, as 17 out of the 60 Aristocrats in the S&P 500 were removed in 2008 and 2009.

As mentioned before, dividend aristocrats have consistently outperformed the broader market since their inception, even during market downturns. Don Kilbride, a senior managing director and portfolio manager at Wellington Management, has noted this performance, particularly with the Vanguard Dividend Growth fund, which he manages. This fund focuses on companies that have reliably increased their dividends annually, some for decades. During the 2008 market crash, while the market fell 37%, Vanguard Dividend Growth only lost about two-thirds of that amount, thanks to its dividend-generating stocks. As the market recovered, the fund quickly made up for its losses, outperforming many of its peers. Kilbride further mentioned that dividend growth is crucial for weathering tough markets and achieving long-term success, stating that its benefits are substantial and enduring.

According to analysts, for those building their portfolios, incorporating dividend investments can be beneficial, particularly if the dividends are reinvested. By using dividends to purchase additional shares each time they are received, investors create a cycle where payouts increase with the number of shares owned, leading to the ability to acquire even more shares. In this article, we will take a look at some of the best dividend aristocrat stocks according to analysts.

Our Methodology:

For our list, we first scanned a list of the best dividend aristocrat stocks, which are the companies that have raised their dividends for 25 consecutive years or more. From this group, we picked stocks with a projected upside potential of over 10% based on analyst price targets. The stocks are ranked according to their upside potential, as of August 7. We also measured hedge fund sentiment around each stock according to Insider Monkey’s database of 920 funds as of Q1 2024.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).

Nucor Corporation (NYSE:NUE)

Analyst Upside Potential as of August 7: 26.2%

Nucor Corporation (NYSE:NUE) is a North Carolina-based steel production company that also manufactures related products. The US steel industry is constantly changing due to various internal and external factors, presenting the company with opportunities to compete, adapt, and innovate. This is typical of the commodity-driven steel sector. Investors should focus on the long-term perspective, where Nucor Corporation (NYSE:NUE) has proven to be a significant success. The company has been actively evolving its portfolio and enhancing its capacity to supply the rapidly growing data center sector with the steel required for constructing new data centers. Since the start of the year,  the stock has fallen by nearly 17% but, according to analysts, the stock has the potential to increase in value by 26.2% based on current market projections.

In the second quarter of 2024, Nucor Corporation (NYSE:NUE) reported revenue of over $8 billion, which fell by 15% from the same period last year, but beat analysts’ estimates by $556.5 million. The company has indicated that investors should anticipate a further decline in earnings for the third quarter of 2024, as steel prices continue to drop. In simple terms, it appears that a downturn in the steel industry may be starting, worsened by an influx of imports.

That said, Nucor Corporation (NYSE:NUE) maintains a competitive advantage due to its robust dividend history. To understand this better, it’s important to examine the company’s cash position. At the end of the latest quarter, Nucor had more than $5.43 billion in cash. Its operating cash flow over the trailing twelve months was $5.93 billion, and levered free cash flow for the period totaled $2.42 billion. The strong cash flow generation presents a bright future for dividend payments. The company has never missed a dividend in over 205 consecutive quarters. Moreover, it has been rewarding shareholders with growing dividends for the past 51 years, which makes NUE one of the best dividend aristocrat stocks. In the first six months of the year, the company returned $1.7 billion to shareholders. It currently offers a quarterly dividend of $0.54 per share and has a dividend yield of 1.48%, as of August 7.

As per Insider Monkey’s database of Q1 2024, 39 hedge funds held investments in Nucor Corporation (NYSE:NUE), down slightly from 40 in the previous quarter. These stakes have a collective value of over $468.7 million. Among these hedge funds, Ken Griffin’s Citadel Investment Group was the company’s leading stakeholder in Q1.

Overall NUE ranks 3rd on our list of the best dividend aristocrats to buy according to Wall Street Analysts. While we acknowledge the potential of NUE as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued dividend stock that is more promising than NUE but that trades at less than 7 times its earnings and yields nearly 10%, check out our report about the dirt cheap dividend stock.

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Disclosure: None. This article is originally published at Insider Monkey.