Nucor Hikes Dividend

Nucor Corporation (NUE - Analyst Report) announced that its board of directors has approved an increase in its regular quarterly cash dividend to 36.75 cents from 36.50 cents. The increased dividend will be paid on February 11, 2013 to shareholders of record as of Dec 31, 2012.

Nucor has a track record of increasing its dividend almost every year since it started paying dividends in 1973. The increase in dividend reflects the company’s strong potential to generate a consistent stream of earnings in the long term.

Many companies are also reviewing their dividend policies, as investors would need to pay higher taxes on dividend from next year. Since 2003, investors were required to pay a maximum 15% on dividend income, which will be scrapped in January next year. For the highest income bracket, the tax rate on dividends could go up to 43.4%.

In October 2012, Nucor released its third quarter 2012 results. The company reported adjusted (excluding special items) earnings of 45 cents per share in the quarter, ahead of the Zacks Consensus Estimate of 42 cents. The adjusted earnings exclude costs associated with the buyout of Skyline Steel and loss on divestiture of the assets of Nucor Wire Products Pennsylvania, Inc.

Profit (as reported) came in at $110.3 million or 35 cents a share, down 39% from $181.5 million or 57 cents reported a year ago. The bottom line was hurt by lower operating profits at the company’s steel mills, especially in sheet and plate.

Revenues slid 8.6% year over year to $4,801 million, missing the Zacks Consensus Estimate of $4,856 million. An 8% fall in average sales price weighed on Nucor’s revenues in the quarter. Total tons shipped to outside customers dipped 0.3% to 5.8 million tons and total mill shipments decreased 1.7% to 5.0 million tons in the reported quarter.

Nucor, which competes with Commercial Metals Co. (CMC - Snapshot Report) and United States Steel Corp. (X - Analyst Report), maintains a Zacks #3 Rank, which translates into a short-term (1 to 3 months) Hold rating. We currently have a long-term (more than 6 months) Neutral recommendation on the shares of the company.