Coca-Cola (KO 0.14%) is generally considered one of the best beverage makers in the world, with a leading market share in several key industry segments. Its ubiquitous Coke brand is recognized around the globe. While steelmaker Nucor (NUE -0.59%) may not have that same level of brand recognition for any of its specific products, there are a number of ways in which Nucor and Coca-Cola are very similar. Here's why Nucor is the Coca-Cola of the steel industry.

It's an industry leader in its core markets

Nucor is a North American steel manufacturer, so it lacks the global scale of Coca-Cola. However, it is a leader in its main market, the United States. Larger and more diversified than any of its peers, one of the steel maker's primary goals is to take the No. 1 or No. 2 spot in any industry segment it serves. To put some numbers on that, it is the industry leader in seven products and holds the second slot in another four. It's third in one (sheet steel), but it uses that material internally to make other products. 

A man standing in front of steel being poured

Image source: Getty Images

Being the largest player gives Nucor the ability to take the lead on things like pricing, with competitors often falling in line once the steelmaker raises or lowers prices. And it provides economies of scale, helping keep costs low. In this situation, bigger is better, which is one of the key factors that helps drive Coca-Cola's success.

It has a special recipe for success

Although it wouldn't be exactly correct to say that Nucor has a "secret" recipe like the one for Coca-Cola's famous Coke brand, it does have a very-hard-to-replicate approach. The first piece of that is its use of electric arc furnaces, which are more flexible and efficient than the older blast furnace technology that underpins some of its competitors' mills. There are other companies that use electric arc mills, like Steel Dynamics, but building mills is expensive and time-consuming. It will take competitors a long time to catch up to Nucor's scale, if they can ever achieve it. 

Next, Nucor is vertically integrated. Its mills make heavy use of scrap metal, and Nucor, via its David J. Joseph Company, is one of the largest players in the scrap metal space. It's also been working to create additional input alternatives, including building two direct reduced iron ore plants (an alternative to scrap), to ensure it has access to the cheapest inputs available at any given time. 

Moreover, it uses its own production of commodity steel to feed its production of higher-margin specialty products. In this way, it maximizes the use of its owned facilities while building businesses that offer higher profits. And as if that weren't enough, it has a unique pay structure in which a significant portion of employee compensation is based on profit sharing. When Nucor does well, its employees do well; when Nucor is struggling, its employees feel the pinch too, giving the company a break on one of its biggest costs right when it needs it. 

There is no company that comes close to matching this combination of positive attributes. This underpins the company's ability to generate industry-leading margins in good and bad markets alike.

It's shown a dedication to the dividend

One other area where Nucor and Coca-Cola have a great similarity is their impressive dividend records. Nucor's dividend has been increased annually for 47 consecutive years. While that falls short of Coca-Cola's 58 years, Nucor's streak basically goes back to the point at which it started making steel. It did other things before repositioning itself in the late 1960s and early 1970s. 

NUE Dividend Yield Chart

NUE Dividend Yield data by YCharts

However, there's a big difference here between Coca-Cola and Nucor that is very important. Coca-Cola's business is fairly stable over time, while Nucor's business is highly cyclical. So, in some ways, the steel maker's ability to keep growing its dividend through good markets and bad is even more impressive than what Coca-Cola has achieved. 

Time for a deep dive

If you've never considered a steel mill because of the volatile nature of the industry, you might want to step back and rethink that decision. Steel isn't soda, of course, but Nucor has managed to create an industry-leading position with a unique business approach while rewarding investors well all along the way. That sounds a lot like Coca-Cola. And the cyclical nature of the industry actually allows dividend investors a chance to get in the door at a decent price while other investors are focused on steel markets instead of Nucor's incredibly strong industry position. In fact, its 3.8% dividend yield is currently toward the high end of its historical range, suggesting that now could be a good time to start looking at shares.