It was recently noted by an analyst at UBS that investors could see a number of mini-mill steel producers rally if a recovery in the non-residential construction sector were to take place over the next several months.
As a result of Mr. Murphy's recent comments, I wanted to take a closer look at Nucor (NUE), and highlight several of the reasons why I'm staying bullish on this particular mini-mill steel play.
#1: Recent Trend Behavior
On Tuesday, shares of NUE, which currently possess a market cap of $16.77 billion, a forward P/E ratio of 18.17, and a dividend yield of 2.82% ($1.48), settled at a price of $52.79/share. Based on their closing price of $52.79/share, shares of NUE are trading 1.06% above their 20-day simple moving average, 1.32% above their 50-day simple moving average and 12.35% above their 200-day simple moving average. These numbers indicate a short-term, mid-term, and long-term uptrend for the stock, which generally signals a moderate buying mode for most long-term investors.
#2: 5-Year Dividend Behavior
Since December 29, 2008, the company has increased its quarterly distribution five times in the last five years, with the most recent increase having taken place in December of 2013. The company's forward yield of 2.82% ($1.48) coupled with its ability to maintain its quarterly distribution over last five years, make this particular steel play a highly considerable option, especially for those who may be in the market for a moderately-yielding dividend play.
According to the company's website, "Nucor has increased its regular, or base, dividend for more than 40 consecutive years - every year since it first began paying dividends in 1973. Reflecting the Nucor team's success in building Nucor's long-term earnings power, the base quarterly dividend has more than tripled since the end of 2007."
#3: Comparative Dividend Behavior
Not only does the company's 2.82% distribution yield and 5-year distribution growth make this particular stock a highly attractive option for most income-driven investors, its distribution growth over the last five years versus one of its sector-based peers is also something investors should consider. From a comparative standpoint, Nucor's distribution has grown a modest 5.71% over the past five years, whereas the distribution growth of its sector-based peer Commercial Metals (CMC) has remained unchanged.
Risk Factors (Most Recent 10-K)
According to Nucor's most recent 10-K, there are a number of risk factors investors should consider before establishing a position. These risk factors include but are not limited to:
#1 - The company's recovery from the global recession and the credit crisis has and likely will continue to adversely affect its business.
#2 - Overcapacity in the global steel industry could increase the level of steel imports, which may negatively affect Nucor's business, the results of its operations and its cash flows.
#3 - The company's steelmaking and DRI processes, and the manufacturing processes of many of its suppliers and customers, are energy intensive and generate carbon dioxide and other GHGs, and the regulation of GHGs, through new regulations or legislation in an onerous form, could have a material adverse impact on the company's results of operations, its financial condition and its cash flows.
For those of you who may be considering a position in Nucor, I strongly recommend keeping a close eye on the company's trend related performance, its dividend behavior, and its ability to enhance shareholder value over the next 12-24 months as each of these factors could play a role in the company's long-term performance.