In This Article:
New Jersey Resources Corporation (NYSE:NJR) will pay a dividend of $0.3625 on the 3rd of October. This payment means that the dividend yield will be 3.3%, which is around the industry average.
View our latest analysis for New Jersey Resources
New Jersey Resources' Earnings Easily Cover the Distributions
We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, earnings were actually smaller than the dividend, and the company was actually spending more cash than it was making. This high of a dividend payment could start to put pressure on the balance sheet in the future.
The next year is set to see EPS grow by 181.9%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 56% which would be quite comfortable going to take the dividend forward.
New Jersey Resources Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $0.72 in 2012, and the most recent fiscal year payment was $1.45. This works out to be a compound annual growth rate (CAGR) of approximately 7.3% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
The Dividend Has Limited Growth Potential
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. New Jersey Resources' EPS has fallen by approximately 12% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.
New Jersey Resources' Dividend Doesn't Look Sustainable
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. This company is not in the top tier of income providing stocks.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. To that end, New Jersey Resources has 4 warning signs (and 2 which are significant) we think you should know about. Is New Jersey Resources not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.