Why National Fuel Gas (NFG) is a Top Dividend Stock for Your Portfolio
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.
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 1.39% since the start of the year. The energy company is currently shelling out a dividend of $0.47 per share, with a dividend yield of 2.93%. This compares to the Utility - Gas Distribution industry's yield of 3.12% and the S&P 500's yield of 1.72%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.90 is up 2.2% from last year. National Fuel Gas has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 2.59%. 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. National Fuel Gas's current payout ratio is 34%. This means it paid out 34% of its trailing 12-month EPS as dividend.
NFG is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $7.44 per share, representing a year-over-year earnings growth rate of 26.53%.
Bottom Line
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.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. 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 presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #1 (Strong Buy).
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