Subscribe to Entrepreneur for $5
Subscribe

This is Why National Fuel Gas (NFG) is a Great Dividend Stock

Dividends are one of the best benefits to being a shareholder, but finding a great dividend stock is no easy task. Does National Fuel Gas (NFG) have what it takes?...

By
This story originally appeared on Zacks

All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

- Zacks

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.

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 1.38% since the start of the year. Currently paying a dividend of $0.46 per share, the company has a dividend yield of 2.81%. In comparison, the Utility - Gas Distribution industry's yield is 2.83%, while the S&P 500's yield is 1.31%.

In terms of dividend growth, the company's current annualized dividend of $1.82 is up 1.1% 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 2.36%. 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 43%. This means it paid out 43% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for NFG for this fiscal year. The Zacks Consensus Estimate for 2022 is $5.29 per share, with earnings expected to increase 23.31% from the year ago period.

Bottom Line

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. 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).



Zacks' Top Picks to Cash in on Artificial Intelligence

In 2021, this world-changing technology is projected to generate $327.5 billion in revenue. Now Shark Tank star and billionaire investor Mark Cuban says AI will create "the world's first trillionaires." Zacks' urgent special report reveals 3 AI picks investors need to know about today.

See 3 Artificial Intelligence Stocks With Extreme Upside Potential>>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

 

National Fuel Gas Company (NFG): Free Stock Analysis Report

 

To read this article on Zacks.com click here.

 

Zacks Investment Research