Why New Jersey Resources (NJR) is a great dividend-paying stock right now

AAll investors love to earn big returns from their portfolio, whether 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 goal.

While cash flow can come from bond interest or interest from other types of investments, income investors focus on dividends. A dividend is the coveted distribution of a company’s profits paid to shareholders, and investors often view it by its dividend yield, a measure that measures the dividend as a percentage of the current stock price. Numerous academic studies show that dividends are a significant part of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Focus on New Jersey resources

Wall Township-based New Jersey Resources (NJR) is a utility stock that has seen a 15.61% price change so far this year. Currently paying a dividend of $ 0.33 per share, the company has a dividend yield of 3.24%. In comparison, the performance of the utility industry – gas distribution is 3.08%, while the return of the S&P 500 is 1.35%.

When it comes to dividend growth, the company’s current annualized dividend of $ 1.33 is up 4.7% from a year ago. New Jersey Resources has increased its dividend 5 times year over year over the past 5 years for an average annual increase of 7.28%. Going forward, future dividend growth will depend on earnings growth and the payout ratio, which is the proportion of a company’s annual earnings per share that it pays out as dividends. Right now, New Jersey Resources’ payout ratio is 49%, which means it has paid out 49% of its past 12-month EPS as a dividend.

Looking at this fiscal year, NJR expects solid earnings growth. Zacks’ consensus estimate for 2021 is $ 2.07 per share, which represents a year-over-year profit growth rate of 0.49%.

Final result

Investors love dividends for a variety of reasons, ranging from tax benefits and lower overall portfolio risk to dramatically improving earnings from equity investments. However, not all companies offer quarterly payment.

Large, established companies that have safer earnings are often considered the best dividend options, but it is quite rare to see high growth companies or tech start-ups offering a dividend to their shareholders. Income investors should be aware that high yielding stocks tend to struggle during times of rising interest rates. With that said, they can take comfort in the fact that NJR is not only an attractive dividend game, but also a compelling investment opportunity with a Zacks ranking of # 2 (buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

About Warren Dockery

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