New Jersey Resources (NYSE:NJR) Has Announced A Dividend Of $0.39
The board of New Jersey Resources Corporation (NYSE:NJR) has announced that it will pay a dividend of $0.39 per share on the 2nd of October. This means that the annual payment will be 3.5% of the current stock price, which is in line with the average for the industry.
Check out our latest analysis for New Jersey Resources
New Jersey Resources' Payment Has Solid Earnings Coverage
We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, New Jersey Resources was earning enough to cover the dividend, but it wasn't generating any free cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.
The next year is set to see EPS grow by 6.0%. If the dividend continues on this path, the payout ratio could be 54% by next year, which we think can be pretty sustainable going forward.
New Jersey Resources Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2013, the annual payment back then was $0.80, compared to the most recent full-year payment of $1.56. This works out to be a compound annual growth rate (CAGR) of approximately 6.9% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
The Dividend's Growth Prospects Are Limited
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, New Jersey Resources has only grown its earnings per share at 3.4% per annum over the past five years. New Jersey Resources is struggling to find viable investments, so it is returning more to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about New Jersey Resources' payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for New Jersey Resources you should be aware of, and 1 of them is potentially serious. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
