Should You Buy Nucor Corporation (NYSE:NUE) For Its Upcoming Dividend?

Nucor Corporation (NYSE:NUE) stock is about to trade ex-dividend in 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Nucor investors that purchase the stock on or after the 28th of September will not receive the dividend, which will be paid on the 9th of November.

The company's next dividend payment will be US$0.51 per share, and in the last 12 months, the company paid a total of US$2.04 per share. Based on the last year's worth of payments, Nucor has a trailing yield of 1.3% on the current stock price of $153.13. If you buy this business for its dividend, you should have an idea of whether Nucor's dividend is reliable and sustainable. So we need to investigate whether Nucor can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Nucor

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Nucor paid out just 9.3% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 8.1% of its cash flow last year.

It's positive to see that Nucor's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Nucor's earnings have been skyrocketing, up 40% per annum for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Nucor looks like a promising growth company.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Nucor has lifted its dividend by approximately 3.3% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Nucor is keeping back more of its profits to grow the business.

Final Takeaway

Has Nucor got what it takes to maintain its dividend payments? Nucor has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. There's a lot to like about Nucor, and we would prioritise taking a closer look at it.

So while Nucor looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 2 warning signs for Nucor (1 is potentially serious!) that you ought to be aware of before buying the shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.