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

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.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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 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

Based in Williamsville, National Fuel Gas (NFG) is in the Utilities sector, and so far this year, shares have seen a price change of -0.16%. The energy company is currently shelling out a dividend of $0.47 per share, with a dividend yield of 2.98%. This compares to the Utility - Gas Distribution industry's yield of 2.94% and the S&P 500's yield of 1.61%.

In terms of dividend growth, the company's current annualized dividend of $1.90 is up 2.2% 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 2.59%. 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. Right now, National Fuel Gas's payout ratio is 32%, which means it paid out 32% 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 $6.95 per share, which represents a year-over-year growth rate of 18.20%.

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 must be conscious 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).

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