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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.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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.
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 28.08% since the start of the year. The energy company is paying out a dividend of $0.44 per share at the moment, with a dividend yield of 3.38% compared to the Utility - Gas Distribution industry's yield of 3.08% and the S&P 500's yield of 1.35%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.78 is up 1.1% 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 2.29%. 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%. This means it paid out 53% of its trailing 12-month EPS as dividend.
NFG is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2021 is $3.95 per share, which represents a year-over-year growth rate of 35.27%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide 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 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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National Fuel Gas Company (NFG) : Free Stock Analysis Report
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