Nucor Stock Dividend Increase Tells Investors The Underlying Problem

Nucor stock today announced the 40th consecutive dividend increase in its history, moving the quarterly dividend from 36 and a half cents (.365) each quarter to 36 and three quarter cents (.3675) for the next year. While this continues 40 years of uninterrupted dividend increases this latest dividend increase from Nucor Stock is telling us a lot about what is happening in America. It’s called limited growth potential.

Almost every website carried the exact same newswire story today regarding the Nucor Stock dividend increase.

Nucor Stock Increases Quarterly Dividend

Nucor Corp. said Wednesday that its board approved an increase of less than 1 percent in the company’s regular quarterly dividend, to 36.75 cents from 36.5 cents.

The Charlotte, N.C.-based steel company will pay the dividend on Feb. 11 to shareholders of record as of Dec. 31.

Unlike other companies, Nucor did not move up its quarterly payout to protect investors from potentially having to pay higher taxes on dividend income starting in January.

Many companies are reviewing their dividend policies now that it appears investors could soon pay higher taxes. Since 2003 investors have paid a maximum 15 percent on dividend income. But that historically low rate will expire in January unless Congress and President Barack Obama reach a compromise on taxes and government spending.

As it stands, dividends will be taxed as ordinary income in 2013, the same as wages, so rates will go up depending on which income bracket a taxpayer is in. For the highest earners, the dividend rate would jump to 43.4 percent.

Nucor shares rose 11 cents to $40.85 in afternoon trading.

Nucor Stock Dividend Is A Bellwether Of The Economy

The above announcement though does nothing to assist investors. Instead of the above report, analysts should have pointed out that Nucor stock is a bellwether of sorts on the US economy. Nucor as everyone knows is a large iron and steel conglomerate. Nucor grows with the economy and falls with it as well. The earnings per share growth at Nucor is down 19.98% from last year. This is a signal that the economy is stagnating. Growth in the economy at its most basic structure is slowing and stocks like Nucor Stock are reflecting that growth. Nucor Stock is important because it is an infrastructure company which is the most basic growth area of any economy.

Nucor Stock Dividend Chart

The chart below shows the previous changes to Nucor Stock dividend payouts. In 2008 there were a number of dividend changes. By December the stock was issuing a .35 cent dividend. Since then the company has been in serious trouble as it battles back from the deep recession of 2008 to 2009. The dividend increases have been small as you can see in the chart below. They are primarily increasing the dividend only slightly to maintain their 40 years of dividend increases record, but overall the company is not able to grow its business or market share in the present economy.

Nucor Stock Dividend Increases

Recent Dividend increases from Nucor Stock

Nucor Stock Dividend Warning and My Put Selling Strategy

My interest in Nucor Stock all this year has been purely Put Selling. it has been an excellent year for Put Selling. I have stayed away from Put Selling at over-valued prices and kept to Put Selling in fair-value. The chart below shows that in my opinion Nucor Stock is over-valued anywhere above $41 and is at fair-value from about $37.50 to $35.00. It was never under-valued this year in my opinion. This is because throughout this year I felt that stock was too expensive when viewed from the context of the entire economic backdrop. For Nucor Stock to become undervalued it would have had to fall below $30.00 this year which did not occur.

Nucor Stock Chart - 1 Year

One Year Nucor Stock Chart

With the Rate Of Change technical indicator period set for 21 days on the one year chart, the stock had a strong sell signal in early May and a buy signal in mid-October. Through this period when you look at Volume there has really only been a few times and in particular two periods when larger volumes traded. The interest in Nucor Stock is not high for obvious reasons. In the present economy Nucor Stock represents the continuing weakness in the overall economy. But there is enough volatility in Nucor Stock that put premiums remain very good for Put Selling out of the money strikes.

Nucor Stock’s weak dividend increases are indicative of what the entire economy is experiencing – anemic growth at best.

My strategy for Nucor Stock remains Put Selling out of the money and certainly never risking any capital on over-valued prices.