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All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 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 27.45%. The energy company is paying out a dividend of $0.46 per share at the moment, with a dividend yield of 3.47% compared to the Utility - Gas Distribution industry's yield of 3.01% and the S&P 500's yield of 1.35%.
In terms of dividend growth, the company's current annualized dividend of $1.82 is up 3.4% 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 2.39%. 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. National Fuel Gas's current payout ratio is 53%, meaning it paid out 53% 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 $3.95 per share, with earnings expected to increase 35.27% from the year ago period.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers 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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