What happened

Shares of giant U.S. steel mill Nucor Corporation (NUE 1.24%) fell 26% through the first six months of 2020, according to data from S&P Global Market Intelligence. At the lowest point, the stock was down roughly 50%. For comparison, the S&P 500 fell around 30% at its worst point and ended the six-month period off by about 5%. Clearly, Nucor is lagging. But don't get too worried about it.

So what

Steelmaking is a highly cyclical business that waxes and wanes along with the economy. COVID-19 has upended a great many things, with nonessential businesses getting shut down and consumers asked to stay home in an attempt to slow the spread of the coronavirus. That had a negative impact on demand for steel. Furthermore, the U.S. economy fell into a recession in February. 

Man writing on notebook while standing in a steel mill and wearing hard hat

Image source: Getty Images.

But Nucor has lived through tough times before. One of the best examples of the company's ability to survive is its nearly five-decade streak of annual dividend hikes. Conservatively run, it knows how to manage its business when the chips are down. Some key issues to consider are Nucor's use of electric arc mini mills that are more flexible than older blast furnace technology, its industry-leading balance sheet strength, a variable pay structure that reduces salary costs when the company most needs a break, and broad product diversification.   

Now what

If you can handle the cyclical nature of Nucor's business, the steelmaker is likely one of the best-run mills in the United States, if not the world. Still down materially for the year, the stock's 3.8% dividend yield is worth a closer look for income investors willing to pay fair prices for great companies. Or, if you think things will get tough again because of COVID-19, you should at least consider putting Nucor on your wish list.