Nucor Corporation (NUE), Steel Dynamics, Inc. (STLD): This Dividend Aristocrat Defied the Steel Industry’s Smackdown

In recent years, investors have gotten a lot more familiar with the Dividend Aristocrats. With admission to the prestigious list requiring that a company make annually increasing dividend payments for at least a quarter-century, only the strongest companies make the cut. In particular, any company that can’t withstand a slowdown in their industry doesn’t stand much of a chance of becoming an Aristocrat.

Nucor Corporation (NYSE:NUE)

From that context, investors can forgive Nucor Corporation (NYSE:NUE) for resorting to sustaining its dividend-increase streak largely on a technicality. The steelmaker has found itself in the toughest industry conditions in decades, forcing some of its peers to slash their dividends to preserve cash. Yet Nucor Corporation (NYSE:NUE) has been able to give shareholders very modest increases, even under huge competitive pressure. Let’s take a closer look at Nucor Corporation (NYSE:NUE) to see whether it’s likely to sustain that dividend growth.

Dividend Stats on Nucor

Current Quarterly Dividend Per Share $0.3675
Current Yield 3.2%
Number of Consecutive Years With Dividend Increases 40 years
Payout Ratio 112%
Last Increase December 2012

Source: Yahoo! Finance. Last increase refers to ex-dividend date.

Can Nucor survive steel’s slowdown?
Nucor Corporation (NYSE:NUE) has been far from the only steelmaker to suffer from a poor economic environment for the industry. Sluggish economies in Europe and the U.S., combined with big slowdowns for the formerly red-hot growth markets of China, Brazil, and elsewhere in the emerging world, have led to big declines in prices.

In Nucor’s most recent quarter, the company saw revenue fall almost 9%, pulling down earnings by nearly a quarter. Like Nucor Corporation (NYSE:NUE), rival Steel Dynamics, Inc. (NASDAQ:STLD) uses a locally based mini-mill concept, rather than the more massive centralized facilities that most of their competitors use. Steel Dynamics, Inc. (NASDAQ:STLD) saw a similar drop in steel prices result in dramatically lower profits as well.

But Nucor Corporation (NYSE:NUE) is taking steps to become more competitive. By innovating with its direct-reduced-iron production plants in Louisiana, Nucor will employ a combination of scrap metal and new materials, enabling it to use natural-gas-fired heating sources rather than the more costly metallurgical coal that traditional production methods require. Moreover, Nucor’s ventures with nat-gas producer Encana Corporation (USA) (NYSE:ECA) should help ensure steady supplies of that fuel well into the future.