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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
New Jersey Resources in Focus
Based in Wall Township, New Jersey Resources (NJR) is in the Utilities sector, and so far this year, shares have seen a price change of 22.78%. The energy services holding company is currently shelling out a dividend of $0.33 per share, with a dividend yield of 3.05%. This compares to the Utility - Gas Distribution industry's yield of 2.86% and the S&P 500's yield of 1.29%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.33 is up 4.7% from last year. In the past five-year period, New Jersey Resources has increased its dividend 5 times on a year-over-year basis for an average annual increase of 7.28%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, New Jersey Resources's payout ratio is 49%, which means it paid out 49% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, NJR expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $2.07 per share, with earnings expected to increase 0.49% from the year ago period.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, NJR presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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NewJersey Resources Corporation (NJR) : Free Stock Analysis Report
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