National Fuel Gas (NFG) is a Top Dividend Stock Right Now: Should You Buy?
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 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
Based in Williamsville, National Fuel Gas (NFG) is in the Utilities sector, and so far this year, shares have seen a price change of 50.33%. The energy company is paying out a dividend of $0.46 per share at the moment, with a dividend yield of 2.94% compared to the Utility - Gas Distribution industry's yield of 3.01% and the S&P 500's yield of 1.36%.
Looking at dividend growth, the company's current annualized dividend of $1.82 is up 1.1% 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 2.41%. 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. Right now, National Fuel Gas's payout ratio is 43%, which means it paid out 43% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, NFG expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $5.29 per share, with earnings expected to increase 23.31% from the year ago period.
Bottom Line
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. 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. 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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