1 Magnificent Dividend King Down 30% to Buy and Hold Forever

Key Points

• Nucor is a U.S. steel giant and Dividend King.

• The company is diversified and has a strong business plan.

• Its stock is cyclical and out of favor right now.

• 10 stocks we like better than Nucor ›

Nucor (NYSE: NUE) is one of the largest steelmakers in North America, but that's not what separates it from the pack. The big story here is the fact that Nucor is a Dividend King. And right now, the stock appears to still be in Wall Street's doghouse, which could be a buying opportunity for investors whose holding period is forever. Here's what you need to know.

What does Nucor do?

Nucor makes steel, but this is only part of the story. The other piece is that it uses electric arc mini-mills in the process. This technology tends to be more flexible than blast furnaces that make primary steel. Thus, the company can ramp production up and down based on demand more easily. That allows it to support its profit margins through the industry's cycles.

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Image source: Getty Images.

The steelmaking cycle is worth considering. Demand and pricing often rise and fall along with economic activity. Given the industrial importance of steel, that makes sense. However, it also means that the business is a bit volatile and the stock is prone to wide price swings.

Right now, the stock is down around 30% from the peaks it achieved in 2024. That sounds like a huge decline, but it is actually an improvement from the more than 40% it had been down before a rally.

Declines of 40% or more occurred in 2020 and 2022. So essentially, this is really just a normal swing. But that doesn't mean you should ignore the opportunity here.

NUE data by YCharts.

Nucor is a Dividend King

Despite the inherent volatility of the steel sector, Nucor has managed to increase its dividend every single year for over 50 consecutive years. A company doesn't achieve Dividend King status by accident; it requires a strong business model that is well executed in both good markets and bad.

In fact, management's goal is generally to produce higher highs and higher lows for its business. It does this with a capital investment plan that focuses on upgrading technology; expanding product offerings; and broadening out to include new, higher margin products.

As the company's business grows so, too, does its capacity to generate revenue and earnings. And that leads to higher highs and higher lows on the earnings front over time.

With roughly $3 billion in capital spending on tap in 2025, more growth seems likely for the business and the dividend. That said, it is important to highlight one thing: The dividend yield is only 1.7%. This isn't a stock you buy because you need income. It is a stock you buy because you want long-term exposure to the steel sector, and you want to get that exposure via the industry's most reliable dividend stock.

You buy Nucor when Wall Street is putting it on sale

As a cyclical stock, the best time to buy Nucor isn't when investors are enamored with it. The time to step aboard is when the stock is out of favor, which remains the case today.

Would it have been better to buy when the stock was down over 40%? Sure, but 30% is still a material drawdown, and if you are intending to own Nucor for the long term, the price remains attractive. The key to the story, however, is that this Dividend King has proved that its business model can survive just about anything the market and the economy throws at it.

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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.