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Why National Fuel Gas (NFG) is a Top Dividend Stock for Your Portfolio

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All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 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 - Free Report) is headquartered in Williamsville, and is in the Utilities sector. The stock has seen a price change of 13.27% since the start of the year. Currently paying a dividend of $0.44 per share, the company has a dividend yield of 3.82%. In comparison, the Utility - Gas Distribution industry's yield is 3.06%, while the S&P 500's yield is 1.47%.

Looking at dividend growth, the company's 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 2.42%. 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. Right now, National Fuel Gas's payout ratio is 59%, which means it paid out 59% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for NFG for this fiscal year. The Zacks Consensus Estimate for 2021 is $3.76 per share, representing a year-over-year earnings growth rate of 28.77%.

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.

For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. 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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