Nucor (NYSE:NUE) Is Increasing Its Dividend To $0.51

Nucor Corporation's (NYSE:NUE) periodic dividend will be increasing on the 10th of February to $0.51, with investors receiving 2.0% more than last year's $0.50. Although the dividend is now higher, the yield is only 1.5%, which is below the industry average.

View our latest analysis for Nucor

Nucor's Earnings Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive. However, Nucor's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to fall by 67.3%. If the dividend continues along recent trends, we estimate the payout ratio could be 19%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Nucor Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2012, the annual payment back then was $1.46, compared to the most recent full-year payment of $2.00. This works out to be a compound annual growth rate (CAGR) of approximately 3.2% a year over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Nucor has seen EPS rising for the last five years, at 58% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

We Really Like Nucor's Dividend

Overall, a dividend increase is always good, and we think that Nucor is a strong income stock thanks to its track record and growing earnings. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Nucor has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about. Is Nucor not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.