Here’s What We Like About Nucor’s (NYSE:NUE) Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see Nucor Corporation (NYSE:NUE) is about to trade ex-dividend in the next four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company’s books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase Nucor’s shares before the 30th of December in order to receive the dividend, which the company will pay on the 11th of February.

The company’s next dividend payment will be US$0.50 per share, and in the last 12 months, the company paid a total of US$1.62 per share. Based on the last year’s worth of payments, Nucor stock has a trailing yield of around 1.7% on the current share price of $114.3. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That’s why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View 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 is paying out just 9.8% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. The good news is it paid out just 19% of its free cash flow in the 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. If earnings fall far enough, the company could be forced to cut its dividend. That’s why it’s comforting to see Nucor’s earnings have been skyrocketing, up 136% 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 past 10 years, Nucor has increased its dividend at 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.

To Sum It Up

Should investors buy Nucor for the upcoming dividend? 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. Nucor looks solid on this analysis overall, and we’d definitely consider investigating it more closely.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To that end, you should learn about the 2 warning signs we’ve spotted with Nucor (including 1 which is concerning).

If you’re in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.