Dividend stocks are more popular than ever right now. Seeing your stock price go up is always nice, but getting a cash payment that you can spend or reinvest appeals to investors who want to see concrete evidence of the smart choices they've made with a stock. Today, I want to introduce you to a dividend stock from maybe the most unlikely sector of the market you can think of.
If I mention the steel industry, it probably conjures visions in your head of abandoned industrial zones with decaying mill buildings in Rust Belt cities. The industrial boom that followed World War II was highly profitable for steelmakers, but as changing economic conditions and increasing global competition emerged, the industry went through a huge decline that saw closures of many companies that in today's terms would have seemed too big to fail.
But one company refused to cave in to the decline. Instead, it responded to the huge changes in the economics of steel by doing two things: innovating to make its operations more efficient, and changing the rules of the game to fit its own strengths.
In particular, this company pioneered the use of small "minimills" nearly a half-century ago. That move made the distance between production facilities and the sources where they got their raw materials much smaller. That, in turn, made it easier for the company to stay competitive and to build minimills wherever they were best suited to grab nearby supplies.
The company also was energy conscious even before energy was as big a concern as it is today. By using electric furnaces rather than higher-cost blast furnaces, this company avoids what would otherwise be much larger energy expenditures. And with another look at its crystal ball, this steelmaker figured out early on that by using scrap metal instead of raw pig iron, it can save money and make use of recycled material.
Last but best of all, this company will make you feel good to own it. The steelmaker has never laid off an employee for economic reasons. And with a pay system that's based on performance at every stage of the process, the company rewards workers at all levels who get the job done.
The company is Nucor, and unlike most of its competitors, it combines growth prospects with a healthy dividend that was recently in the 3% to 3.5% range. Having survived the financial crisis with minimal damage, Nucor has seen its shares rise dramatically in anticipation of a pick-up in economic activity throughout the global economy. Even as many of its steel-making peers have been slow to recover from the slowdown within China and other fast-growing emerging markets and have continued to post losses, Nucor has managed to stay ahead of many of its competitors, and its shares have outperformed the bulk of its industry peers. Moreover, when the world economy does return to a steeper growth trajectory, Nucor will be a smart play to capitalize on that growth.
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