Today we continue with a special 5-part series from Bob Ciura, contributing editor of Sure Dividend, highlighting the 5 highest-yielding Dividend Kings — a select group of 39 stocks that have increased dividends for over 50 years.
Northwest Natural Gas Holding Company (NWN) is the fourth highest-yielding Dividend King right now, with a current yield just above 4%. This is a very attractive yield, considering the S&P 500 Index yields just ~1.3% on average.
Northwest Natural Gas is a high-yield stock with a very high level of dividend safety. Because the company operates in the utility sector, it has a nearly guaranteed stream of revenue and profits each year. NW Natural’s safe dividend payout and high yield make it an appealing dividend stock for risk-averse income investors.
Business Overview & Growth Prospects
NW Natural is a natural gas utility company that was founded in 1859. It serves more than 760,000 customers today, primarily in the Pacific Northwest. NW Natural is a relatively small company, with a market cap of just $1.4 billion, making its long dividend streak that much more impressive.
2021 was another year of consistent profitability and solid growth for NW Natural. In the third quarter, revenue grew by 8.7% year-over-year. Net income grew 55% to $1.24 per share for the first nine months of 2021. The company also reported that it added nearly 12,000 natural gas meters over the past 12 months.
Future growth is likely to be modest for NW Natural. Since utilities are highly regulated, the company is not in control over its pricing and margins. However, in return a highly regulated utility like NW Natural enjoys a predictable level of earnings and growth.
Nevertheless, the company should manage low-single-digit earnings growth, which should allow for annual dividend increases. Growth will be derived from approved pricing increases and continued customer acquisition. NW Natural also has a water utilities business that will provide a small amount of growth.
High Level Of Dividend Safety
As a utility, NW Natural is not likely to produce high growth. However, the benefits of investing in utility stocks is a highly secure dividend payout, with room for dividend increases even during recessions.
The reason for this dividend safety is straightforward—consumers will always need gas delivered to their homes, even when the U.S. economy enters a downturn. As a result, utility stocks are among the safest dividend stocks.
Meanwhile, NW Natural expects EPS in a range of $2.40 and $2.60 for 2021. With a current annualized dividend payout of $1.93 per share, NW Natural has a projected dividend payout ratio of 77%. This is higher than many other stocks, but is not entirely unusual for a utility stock. And, it leaves plenty of room for small dividend increases each year.
The company has one of the longest dividend increase records in the entire stock market. NW Natural has raised its dividend for 66 consecutive years.
