1 Dividend Aristocrat to Bet on Trump's Tariffs and the Fed's Rate Cuts

Donald Trump is set to become the 47th U.S. president, and broader markets have cheered the former president’s return to the White House. While U.S. stocks rose sharply as the election results trickled in, steel stocks were among the biggest gainers.

Trump’s tariff talk is music to the ears of U.S. steel executives, who often blame cheap imports for their woes. The steel industry is also a play on expected economic growth under a Trump presidency, as well as the Fed’s rate cuts. A Fed rate cut is a positive for rate-sensitive industries like real estate and automotive - and by extension, for steel companies, as these industries are the top two steel consumers in that order. 

For investors in search of a dividend aristocrat to bet on both Trump’s tariffs as well as the Fed’s rate cuts, Nucor (NUE) would fit the bill, as we’ll discuss in this article.

Trump Imposed Tariffs on U.S. Steel Imports in His First Tenure

While this time around Trump hasn’t spoken as much about the steel industry, in his first tenure he invoked Section 232 of the Trade Expansion Act of 1962 to impose a 25% tariff on steel imports. The tariffs fulfilled the industry’s long-standing demand to address the menace of cheap and often subsidized imports. 

However, the Section 232 tariffs have since been greatly watered down. The process began under Trump’s watch itself, and the tariffs on steel imports from Canada and Mexico were lifted in May 2019. In 2021, his successor President Joe Biden suspended tariffs on steel imports from the E.U. for two years, and extended the suspension by another two years in 2023. Similarly, tariffs have been watered down for many other regions.

The U.S. steel industry is yet again grappling with higher imports, and in the first 10 months of the year, finished steel imports were up 2.1% compared to the corresponding period last year, according to data from the American Iron & Steel Institute.

Steel Stocks Rose Sharply After Trump’s Election

While the broader markets – with the notable exception of green energy stocks – rallied after the election, steel stocks stole the limelight, and not without reason, given Trump's tariff threats. As steel stocks, including Nucor, have come off their post-election highs, I believe it is one stock to bet on in anticipation of Trump’s return to the Oval Office and the Fed’s monetary policy easing.

The steel industry should have a much better 2025 after a dismal 2024 where steel prices fell sharply. First, China has opened its coffers to support its sagging economy, which is good for the country’s steel industry - and by extension, the global steel industry. U.S. steel prices are also expected to move up next year, and have likely bottomed at these levels. Any trade actions will help U.S. steel mills increase prices even further next year.

Nucor is a Dividend Aristocrat

While the metal and mining industry is known for its cyclical nature, Nucor stands out as one of the few Dividend Aristocrats in the group. Nucor, which is the largest U.S.-based steel company, has increased its base dividends since 1973. Importantly, it managed to achieve this feat even through the 2008 Global Financial Crisis, the 2016 commodity crash, and most recently, during the COVID-19 pandemic in 2020.

Nucor’s current dividend yield of around 1.36% might not sound too appealing for those in search of high-yielding stocks. However, the company is expected to continue increasing its dividends, as it has done for over half a century – unlike some other high-yielding stocks, whose dividends look to be at risk.

Is Nucor Stock a Buy?

Nucor has gradually increased its market share in the U.S. and is the country’s biggest steel producer, having previously dislodged market leader U.S. Steel Corporation(X). The company continues to invest in new capacity, including for value-added downstream products that are not only higher margin, but also less prone to cyclicity and import pressure.

NUE trades at a next 12-month (NTM) enterprise value-to-earnings before interest, tax, depreciation, and amortization (EV-to-EBITDA) multiple of almost 10x, which is seemingly high, and toward the top end of what the stock has traded at over the last five years. That said, the valuation of metal and mining companies tends to peak near cyclical bottoms. While Nucor said that it would take time for the Fed’s actions to meaningfully impact steel demand in the U.S., steel markets are close to their bottom.

Overall, with decent growth prospects, reasonable valuations, and prospects of higher steel tariffs under the Trump administration, I find Nucor to be one dividend aristocrat to buy for the medium term and bet on a revival in the beaten-down industry.