Back to top

Image: Bigstock

This is Why MDU Resources (MDU) is a Great Dividend Stock

Read MoreHide Full Article

Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But 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.

MDU Resources in Focus

Headquartered in Bismarck, MDU Resources (MDU - Free Report) is a Utilities stock that has seen a price change of 20.62% so far this year. The energy, mining, construction and utilities company is currently shelling out a dividend of $0.21 per share, with a dividend yield of 2.68%. This compares to the Utility - Gas Distribution industry's yield of 2.85% and the S&P 500's yield of 1.33%.

In terms of dividend growth, the company's current annualized dividend of $0.85 is up 1.8% from last year. Over the last 5 years, MDU Resources has increased its dividend 5 times on a year-over-year basis for an average annual increase of 2.59%. 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. MDU Resources's current payout ratio is 44%. This means it paid out 44% of its trailing 12-month EPS as dividend.

MDU is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2021 is $2.05 per share, which represents a year-over-year growth rate of 5.13%.

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. However, not all companies offer 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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, MDU 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).


In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


MDU Resources Group, Inc. (MDU) - free report >>

Published in