All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and, of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Headquartered in Tulsa, ONE Gas (OGS) is a Utilities stock that has seen a price change of 15.12% so far this year. Currently paying a dividend of $0.68 per share, the company has a dividend yield of 3.06%. In comparison, the Utility - Gas Distribution industry's yield is 2.78%, while the S&P 500's yield is 1.39%.
Looking at dividend growth, the company's current annualized dividend of $2.72 is up 1.5% from last year. Over the last 5 years, ONE Gas has increased its dividend 5 times on a year-over-year basis for an average annual increase of 4.53%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. ONE Gas's current payout ratio is 60%, meaning it paid out 60% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for OGS for this fiscal year. The Zacks Consensus Estimate for 2026 is $4.73 per share, with earnings expected to increase 5.58% from the year ago period.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that OGS is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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ONE Gas, Inc. (OGS): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).