New Jersey Resources (NYSE:NJR)’s dividend is $0.45

New Jersey Resources Corporation (NYSE:NJR) announced that it will pay a dividend of $0.45 per share on January 2nd. This means that the dividend yield roughly corresponds to the industry average of 3.5%.

Check out our latest analysis for New Jersey Resources

We’re not too impressed with dividend yields unless they can be sustained over a long period of time. Based on the most recent payment, New Jersey Resources’ profits were much higher than its dividend, but the company did not convert those profits into cash flow. A lack of cash flow could definitely make it more difficult to return cash to shareholders, or at least cause the balance sheet to come under pressure.

Next year’s earnings per share are forecast to rise 13.2%. Assuming the dividend follows recent trends, we think the payout ratio could be 57% by next year, which is in a fairly sustainable range.

The company has a sustained track record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $0.84 in 2014 and the payment in the last fiscal year was $1.80. This results in a compound annual growth rate (CAGR) of approximately 7.9% per year for this period. The dividend has been growing very well for several years and has provided shareholders with nice returns in their portfolios.

The company’s investors will be happy to know that it has been receiving dividend income for some time. It’s encouraging to see that New Jersey Resources has grown its earnings per share at 16% per year over the last five years. While this company looks attractive as an income stock on an earnings basis, the cash payout ratio still makes us cautious.

Overall, we’re always happy to see a dividend increase, but we don’t think New Jersey Resources will be a great income stock. While New Jersey Resources makes enough to cover payments, cash flows are lacking. We’d be a little cautious about relying on this stock primarily for its dividend income.

Companies with a stable dividend policy are likely to attract greater interest from investors than companies with a more inconsistent approach. However, there are other things for investors to consider when analyzing stock performance. To this end, New Jersey Resources 3 warning signs (and 1, which is a bit unpleasant) we think you should know. Looking for more high-yield dividend ideas? Try ours Collection of strong dividend payers.

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This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended as financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term focused analysis based on fundamental data. Note that our analysis may not reflect the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.