1 Magnificent Dividend Stock Down 33% to Buy and Hold Forever

While President Donald Trump's announcement of tariffs sent markets into a temporary tailspin, many stocks have since recovered. But one name that has failed to bounce back is the steelmaker Nucor (NYSE: NUE).

For income investors who have the steely resolve to withstand some near-term volatility in its stock, Nucor and its 1.9% forward-yielding dividend represents a great buying opportunity right now, with shares trading 33% lower than a year ago.

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Steal a glance at this stalwart steel company

The company calls itself "North America's most diversified steel producer." Its steel mill segment -- which makes the metal in the form of sheets and bars -- is the company's largest, representing 61% of 2024 consolidated sales.

Nucor also generates revenue from its steel products segment, which sells various products such as steel joists, galvanized torque tubes used in solar arrays, electrical conduits, and steel racking for warehouses and data centers. And it provides scrap recycling through its raw materials segment.

The company's history goes back over more than a century, and it has grown to become the largest steel producer in the United States and the biggest by market capitalization. It also has distinguished itself as one of the market's most consistent dividend payers.

Why Nucor stock has nudged lower

Talk about tariffs and fear of impending trade wars have greatly motivated investors to distance themselves from Nucor stock, but much of its decline can also be attributed to the company's recent decline in profitability. After reporting earnings before interest, taxes, depreciation, and amortization of $7.4 billion in 2023, that metric fell to only $4.44 billion in 2024 -- an inferior performance that it largely chalked up to lower average selling prices.

This also affected cash flow. After generating free cash flow of $4.9 billion in 2023, it was only $806 million in 2024.

For those unfamiliar with steel stocks, the performance in 2024 may suggest that the company is suffering from operational missteps that must be remedied before buying the stock. But this is hardly the case. As with other commodities, steelmaking is a cyclical business. The downturns in the industry are part and parcel of investing in a commodity business.

A regal choice for income investors

What Nucor stock lacks in yield, it makes up for in the longevity of its dividend payments. For more than 50 straight years, it has raised its dividend, a rare feat among income-paying stocks that earned it the title of a Dividend King. This doesn't guarantee continued annual raises, but such a lengthy streak is a testament to the company's commitment to rewarding shareholders -- an auspicious sign for the future.

And it's not as if the company's recent dividend raises have been nominal. It has increased its payout 36% -- about 6% annualized -- between 2020 and 2024. Plus, the half-century streak of raising its dividend shows that management was deftly able to balance the company's financial well-being while also rewarding shareholders, even during industry downturns.

For example, during the challenging pricing environment that affected profits and cash flow in 2024, the company managed a conservative payout ratio of 39%. And over the past decade, it has demonstrated the same cautious approach, with an average payout ratio of 43%.

Those with steely resolve will want to click the buy button on Nucor stock

Commodity stocks such as Nucor require investors to endure boom and bust cycles. Though not ideal for everyone, for those who are comfortable riding out industry downturns while collecting some passive income to reward their patience, Nucor is well worth considering right now in light of the stock's steep slide over the past year.

Should you invest $1,000 in Nucor right now?

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Scott Levine has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.