The Dividend King You Never Heard of That’s Beating the Market by 2-to-1
Dividend Kings are stocks that have raised their dividends for 50 consecutive years or more. It is an elite group of companies because, of the thousands of stocks that trade on the market, only about 50 stocks have made the list. Dividend growth stocks are also the best investment if you want to accumulate wealth […] The post The Dividend King You Never Heard of That’s Beating the Market by 2-to-1 appeared first on 24/7 Wall St..
Dividend stocks are the best way for investors to fund a comfortable retirement, especially those that regularly grow their payout over time.
An under-the-radar Dividend King is National Fuel Gas (NFG), which has raised its dividend for 53 consecutive years. But it is a different kind of utility, one that provides exposure to the entire energy sector’s value chain.
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24/7 Wall St. Insights:
Dividend Kings are stocks that have raised their dividends for 50 consecutive years or more. It is an elite group of companies because, of the thousands of stocks that trade on the market, only about 50 stocks have made the list.
Dividend growth stocks are also the best investment if you want to accumulate wealth to enjoy a comfortable retirement.
According to an analysis by Hartford Funds and Ned Davis Research, stocks that initiated a dividend and grew their payouts have beaten all other stocks. Over the 50-year period between 1973 and 2023, dividend growers returned 10.19% annually compared to 4.27% for those that did not pay a dividend.
They beat even those stocks that paid a dividend but didn’t increase them (9.17%) and handily outperformed an equally weighted S&P 500 (7.72%). What is more remarkable is that dividend growth stocks achieved that distinction with lower risk and volatility than all other classes of stocks.
Consistent performance
In an era of artificial intelligence and quantum computing, traditional, standby investments tend to get overlooked. Utility stocks are not as exciting as next-generation technology, so investors tend to ignore them.
Yet income investors understand their worth. With regular and reliable dividend payments, it’s no wonder utilities were often referred to as widows-and-orphans stocks. They were investments they could rely upon year in and year out.
And because of their near-monopoly status, they sport steadily growing revenue streams that allow them to continuously raise their payouts. It is not surprising that you will find a number of utility stocks on the list of Dividend Kings.
A utility unlike most others
A standout member is one that many investors have never heard of, but over the past year is outperforming the S&P 500 index. National Fuel Gas (NYSE:NFG) is actually more than just a utility as it operates a diversified set of energy assets.
In addition to providing natural gas to 755,000 customers in western New York and northwestern Pennsylvania, National Fuel Gas also has substantial gas production activities, and midstream and downstream operations. The utility portion provides just 20% of its revenue.
The gas company derives the most revenue from its exploration and production activities, which generated over $536 million in revenue in 2024, or 57% of its $941 million total. Its midstream pipeline and storage business produced almost 12% of the total, $110.8 million, as did its gathering operations of $109.3 million.
These represent almost the entire value chain of the natural gas industry. Many of the segments will fluctuate over time because of the rise and fall in commodity pricing.
100 years of reliability
National Fuel Gas has paid a dividend for 121 consecutive years and has increased it for each of the last 53 years. It typically raises its payout in March, so investors can expect the next increase to happen then. The dividend yields 2.8% annually.
Over the past year, NFG stock has a total return of 55%, a better than two-to-one outperformance of the benchmark index, which has returned 24.6% for investors. Over the past five years, it has doubled versus the S&P 500’s 80% returns.
Wall Street is looking for National Fuel Gas to grow earnings at 13.5% annually for the next five years and it trades at just 9 times those estimates. They’ve assign a buy rating to the stock, but have a consensus one-year price target of $69 per share, implying 5% downside.
Key takeaway
Investors looking for the sort of rock steady investment typical utilities provide might not be interested in National Fuel Gas. Because the production arm of the business is more susceptible to commodity pricing, it can impact its earnings greatly.
Similarly, those looking for oil and gas drillers might not want the mid- and downstream operations or the more staid utility function.
But income investors seeking broader exposure to the energy markets, and who appreciate the consistent cash flows produced by its midstream and downstream business, along with the reliability of its utility, will want this dividend royal in their portfolio.
The post The Dividend King You Never Heard of That’s Beating the Market by 2-to-1 appeared first on 24/7 Wall St..
