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Why Unitil (UTL) is a Great Dividend Stock Right Now

Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, 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 the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a 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.

Unitil in Focus

Unitil (UTL) is headquartered in Hampton, and is in the Utilities sector. The stock has seen a price change of 6.22% since the start of the year. The utility is paying out a dividend of $0.39 per share at the moment, with a dividend yield of 3.19% compared to the Utility - Electric Power industry's yield of 3.2% and the S&P 500's yield of 1.85%.

Looking at dividend growth, the company's current annualized dividend of $1.56 is up 2.6% from last year. In the past five-year period, Unitil has increased its dividend 5 times on a year-over-year basis for an average annual increase of 1.52%. 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. Right now, Unitil's payout ratio is 60%, which means it paid out 60% of its trailing 12-month EPS as dividend.

UTL is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $2.60 per share, which represents a year-over-year growth rate of 10.64%.

Bottom Line

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers a quarterly payout.

High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that UTL is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).


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