This Stock Has No Business Being This Good and It Just Keeps Going

There are some companies that seem to defy expectations, no matter what adversities are thrown at them. Nucor (NYSE: NUE) is one of them. The steel mill was born from the bankruptcy of another business, and it has become one of the most consistent companies in an industry known for its high cyclicality. The company's winning formula is still paying dividends for investors.

What does Nucor do?

Nucor is a steelmaker, but the key is in how it makes steel. The old method is blast furnaces, which are inflexible and expensive to operate. Nucor helped popularise the new method, electric arc mini-mills. Nucor's mills are highly flexible, allowing them to ramp up and down more easily with demand. This simple fact has created a business model that is highly resilient through the entire steel cycle.

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That's important because steel is highly cyclical, given its importance throughout the economy. Steel goes into everything from buildings to appliances. When a recession comes around, demand for such things can cool off dramatically, given their high costs. But Nucor is prepared for these situations because it can quickly adapt to market conditions. Add in a conservative balance sheet (the debt-to-equity ratio is currently just 0.35x), and industry downturns are actually opportunities for Nucor to invest in its business.

Always investing in the future

To be fair, Nucor is always expanding the business. So even during industry upturns, it is making capital investments. However, using downturns to take advantage of cheap opportunities, particularly via acquisitions, is a vital approach that has differentiated Nucor from other mills. Another factor is Nucor's focus on diversification, specifically into higher-margin steel manufacturing businesses. It has built a company robust enough to easily weather the steel industry's frequent swings.

What is most impressive, however, is Nucor's status as a Dividend King, with 53 consecutive annual dividend increases. There's no end in sight to the dividend streak, either, as it just keeps going through both good and bad times in the steel industry.

Nucor is a best of bread steel stock

Nucor's 1.1% yield is roughly the same as the yield of the S&P 500 index (SNPINDEX: ^GSPC), so it isn't a particular standout there. However, if you are looking at steel stocks, this Dividend King should be at the top of your list. In an industry known for volatile profits, Nucor has long provided the kind of reliability that even the most conservative investors appreciate.

Reuben Gregg Brewer has positions in Nucor. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.