Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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.
National Fuel Gas in Focus
National Fuel Gas (NFG) is headquartered in Williamsville, and is in the Utilities sector. The stock has seen a price change of -3.13% since the start of the year. The energy company is paying out a dividend of $0.43 per share at the moment, with a dividend yield of 3.2% compared to the Utility - Gas Distribution industry's yield of 2.67% and the S&P 500's yield of 1.96%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.70 is up 1.2% from last year. In the past five-year period, National Fuel Gas has increased its dividend 5 times on a year-over-year basis for an average annual increase of 2.59%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. National Fuel Gas's current payout ratio is 51%. This means it paid out 51% of its trailing 12-month EPS as dividend.
NFG is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2018 is $3.41 per share, representing a year-over-year earnings growth rate of 2.10%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, NFG is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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National Fuel Gas Company (NFG) : Free Stock Analysis Report
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