The Dividend Kings are the best-of-the-best in dividend longevity. These are stocks with 50 or more consecutive years of dividend increases, asserts growth and income expert Ben Reynolds, editor of Sure Dividend.
The Dividend Kings list is a great place to find dividend stock ideas. However, not all the stocks in the Dividend Kings list make a great investment at any given time.
The 5 stocks featured in this report are our top-ranked Dividend Kings today, based on expected annual returns through 2025. Stocks are ranked in order of lowest to highest expected annual returns. Total returns include a combination of future earnings-per-share growth, dividends, and any changes in the P/E multiple.
Read Part 1 — Lowe’s Companies here
National Fuel Gas Co. (NFG) — the second stock in our countdown — is a diversified energy company that operates in five business segments: Exploration & Production, Pipeline & Storage, Gathering, Utility, and Energy Marketing. The company’s largest segment is Exploration & Production.
On August 6th, National Fuel Gas reported financial results for the third quarter of fiscal 2020. Adjusted EBITDA declined 6% year-over-year. An increase of 2.4% in production was not enough to offset the impact of weak commodity prices. Average natural gas prices and average oil prices both fell 19% from the same period one year ago.
Despite the suppressed natural gas prices, National Fuel Gas exhibited decent performance, partly thanks to its integrated business model. The company generated adjusted operating earnings-per-share of $0.57 for the quarter.
National Fuel Gas is facing a headwind due to the spread of the coronavirus, but the pandemic has affected the natural gas market much less than the oil market. In addition, the pipeline & storage and gathering segments provide a strong buffer to earnings amid low commodity prices. As a result, management expects adjusted earnings-per-share in a range of $2.75 to $2.85.
The company also raised fiscal 2021 guidance, and now expects a more meaningful recovery next year. Guidance calls for adjusted earnings-per-share in a range of $3.40 to $3.55. Based on expected earnings-per-share of $2.80, NFG stock trades for a price-to-earnings ratio of 16.0, compared with our fair value estimate of 17.5.
An expanding P/E multiple to the fair value estimate could boost annual returns by 1.8% per year over the next five years. Combined with 5% expected EPS growth and the 4.0% dividend yield, total returns are expected to reach 10.8% per year through 2025.
