3 Dividend-Paying Gas Distribution Stocks for Steady Income
Investors expect to get a positive return on investment despite knowing that it comes with its share of risk. Steady income-oriented investors can always pick stocks from the Utilities space even in a volatile market. Domestic-focused mature utility stocks generally have a long history of dividend payments. These are often considered bond substitutes for investment purposes.
Investors can explore the highly regulated Zacks Utility – Gas Distribution industry. Companies from this industry offer services to transport natural gas from the region of production to millions of consumers across the United States.
Investors can focus on stocks like Atmos Energy Corporation ATO, NewJersey Resources Corporation NJR and Sempra Energy SRE, which have an impressive dividend history and ensure a stable income for their equity holders.
Utilities for a Regular Income
Capital-intensive Utilities are adversely impacted by ongoing rate increases, as their capital servicing costs go up substantially, denting margins and profitability. However, the Federal Reserve kept the interest rates unchanged in the June 2023 Fed meeting for the first time since March 2022, which will definitely have a positive impact on these capital-intensive stocks.
Despite the rate increases since March 2022, mature utilities continue with their stable performances, courtesy of steady customer demand, efficient cost management, the implementation of new rates approved by regulatory commissions and gradual hikes in customer volumes driving utility services’ demands.
Utilities continue to expand and strengthen their infrastructure. Due to the stable earnings capabilities of the utilities, these stocks have a long history of dividend payments.
Ways to Pick Dividend Stocks for Your Portfolio
With the help of the Zacks Stock Screener, we have selected three Utility Gas Distribution stocks that have a dividend yield of more than 2% and five-year historical dividend growth of more than 1.5%. These stocks have a payout ratio of less than 60, reflecting enough room for future dividend increases. Two stocks have Zacks Rank #2 (Buy) while one carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Atmos Energy Corporation: This Dallas, TX-based company is engaged in the regulated natural gas distribution and storage business. Atmos Energy plans to invest $11 billion through fiscal 2027. The stock currently carries a Zacks Rank #2. In the past year, the stock has gained 10.3%.
The Zacks Consensus Estimate for ATO’s fiscal 2023 earnings has moved 0.4% higher to $6.02 per share over the past 60 days. The current dividend yield of the company is 2.52% better than the Zacks S&P 500 composite’s average yield of 1.72%. The current dividend payout is 51%. Annualized dividend growth rate (five years) is 9.1%. ATO has increased its dividend five times in the past five years.
New Jersey Resources: This Wall, NJ-based company provides regulated gas distribution, and retail and wholesale energy services to its customers. New Jersey Resources has plans to invest $1.1-$1.4 billion in the fiscal 2023-2024 period. The stock currently carries a Zacks Rank #2. In the past year, the stock has gained 11.6%.
The Zacks Consensus Estimate for NJR’s fiscal 2023 earnings has moved up 0.4% over the past 60 days. The current dividend yield of the company is 3.24%. The current dividend payout is 57%. Annualized dividend growth rate (five years) is 7.5%. NJR has increased its dividend five times in the past five years.
Price Performance (One year)
Image Source: Zacks Investment Research
Sempra Energy: This San Diego, CA-based company is involved in the sale, distribution, storage and transportation of natural gas and electricity. For the 2023-2026 period, the company expects to invest $18.7 billion. These planned investments are expected to strengthen infrastructure and enable the company to serve customers more efficiently. The stock currently carries a Zacks Rank #3. In the past year, the stock has gained 1.8%.
The Zacks Consensus Estimate for SRE’s 2023 earnings has moved up 0.4% to $8.99 share over the past 60 days. The current dividend yield of the company is 3.22%. The current dividend payout is 52%. Annualized dividend growth rate (five years) is 6.2%. SRE has increased its dividend five times in the past five years.
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