This is Why New Jersey Resources (NJR) is a Great Dividend Stock
Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
New Jersey Resources in Focus
Based in Wall Township, New Jersey Resources (NJR) is in the Utilities sector, and so far this year, shares have seen a price change of 11.08%. The energy services holding company is currently shelling out a dividend of $0.33 per share, with a dividend yield of 3.37%. This compares 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 $1.33 is up 4.7% from last year. New Jersey Resources has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 7.01%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, New Jersey Resources's payout ratio is 49%, which means it paid out 49% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, NJR expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $2.12 per share, with earnings expected to increase 2.91% from the year ago period.
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. 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, NJR presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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