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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
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 26.01% since the start of the year. The energy company is paying out a dividend of $0.44 per share at the moment, with a dividend yield of 3.43% compared to the Utility - Gas Distribution industry's yield of 2.73% and the S&P 500's yield of 1.3%.
Looking at dividend growth, the company's current annualized dividend of $1.78 is up 1.1% from last year. Over the last 5 years, National Fuel Gas has increased its dividend 5 times on a year-over-year basis for an average annual increase of 2.29%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. National Fuel Gas's current payout ratio is 53%, meaning it paid out 53% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for NFG for this fiscal year. The Zacks Consensus Estimate for 2021 is $3.95 per share, representing a year-over-year earnings growth rate of 35.27%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. 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, 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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