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Why Black Hills (BKH) is a Top Dividend Stock for Your Portfolio

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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Black Hills in Focus

Black Hills (BKH - Free Report) is headquartered in Rapid City, and is in the Utilities sector. The stock has seen a price change of 12.19% since the start of the year. Currently paying a dividend of $0.56 per share, the company has a dividend yield of 3.28%. In comparison, the Utility - Electric Power industry's yield is 3.21%, while the S&P 500's yield is 1.4%.

In terms of dividend growth, the company's current annualized dividend of $2.26 is up 4.1% from last year. Black Hills has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 6.54%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Black Hills's current payout ratio is 60%. This means it paid out 60% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for BKH for this fiscal year. The Zacks Consensus Estimate for 2021 is $3.88 per share, with earnings expected to increase 4.02% from the year ago period.

Bottom Line

Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. 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, BKH 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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