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Nucor and Steel Dynamics: Steel Earnings Start with a Bang

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Part 5
Nucor and Steel Dynamics: Steel Earnings Start with a Bang PART 5 OF 5

Should Nucor Investors Expect a Special Dividend in 2017?

Earnings call

Previously, we looked at Nucor’s (NUE) 1Q17 earnings. In this part, we’ll look at the industry and company outlook provided by Nucor’s management during the company’s 1Q17 earnings call. We’ll also see what Nucor had to say about its dividend policy amid strengthening steel market conditions.

Should Nucor Investors Expect a Special Dividend in 2017?

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Industry outlook

During the company’s 1Q17 earnings call, Nucor sounded positive about US steel industry’s outlook. The company sees strong domestic demand this year due to higher demand from the construction industry. Nucor also sees demand improving in some of the other end markets like energy and heavy equipment. Notably, demand from both of these sectors fell over the last few years amid falling energy and metal prices.

Nucor sounded equally optimistic about its position in the steel industry. Nucor expects its profits to rise more in 2Q17 after they hit a multi-quarter high in 1Q17. According to Nucor’s release, “Performance of the steel mills segment is expected to improve in the second quarter of 2017 as compared to the first quarter of 2017 as metal margins are expected to expand at our sheet mills due to the delayed impact of contract pricing.”

Special dividend

Nucor carries a healthy dividend yield of 2.6%. Nucor has been raising its quarterly dividend for many years. Commercial Metals Company (CMC) and Steel Dynamics (STLD) also have strong dividend yields of 2.7% and 1.9%, respectively. In response to a question on a special dividend amid solid earnings growth, James Frias, Nucor’s CFO, said that the company would decide by the end of the year on how to “return cash to shareholders.” However, the final decision would be based on how steel market conditions shape up in the coming months.

U.S. Steel Corporation (X) and AK Steel (AKS) are next in line to release their 1Q17 earnings. Read Can U.S. Steel’s 1Q17 Earnings Lift Its Sagging Stock? to find out analysts’ estimates for U.S. Steel Corporation’s 1Q17 earnings.

You can also visit Market Realist’s Steel page for ongoing updates on the industry.

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