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Why RGC Resources Inc. (RGCO) is a Great Dividend Stock Right Now

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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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.

RGC Resources Inc. In Focus

RGC Resources Inc. (RGCO - Free Report) is headquartered in Roanoke, and is in the Oils-Energy sector. The stock has seen a price change of -4.87% since the start of the year. The company is currently shelling out a dividend of $0.2 per share, with a dividend yield of 4.13%. This compares to the Oil and Gas - Refining and Marketing industry's yield of 3% and the S&P 500's yield of 1.58%.

In terms of dividend growth, the company's current annualized dividend of $0.80 is up 1.5% from last year. In the past five-year period, RGC Resources Inc. has increased its dividend 5 times on a year-over-year basis for an average annual increase of 4.61%. 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, RGC Resources Inc.'s payout ratio is 60%, which means it paid out 60% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, RGCO expects solid earnings growth. The Zacks Consensus Estimate for 2024 is $1.16 per share, representing a year-over-year earnings growth rate of 1.75%.

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. 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, RGCO 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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