Is Unitil (UTL) a Good Pick for Income Investors?
Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But 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 that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the 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.
Unitil in Focus
Based in Hampton, Unitil (UTL) is in the Utilities sector, and so far this year, shares have seen a price change of 8.81%. The utility is paying out a dividend of $0.37 per share at the moment, with a dividend yield of 2.94% compared to the Utility - Electric Power industry's yield of 3.21% and the S&P 500's yield of 1.79%.
Looking at dividend growth, the company's current annualized dividend of $1.46 is up 1.4% from last year. Unitil has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 1.30%. 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. Unitil's current payout ratio is 65%, meaning it paid out 65% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for UTL for this fiscal year. The Zacks Consensus Estimate for 2018 is $2.22 per share, representing a year-over-year earnings growth rate of 7.77%.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. 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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that UTL is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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