Yahoo Finance Why NRG Energy (NRG) is a Top Dividend Stock for Your Portfolio
Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
NRG Energy in Focus
Based in Houston, NRG Energy (NRG) is in the Utilities sector, and so far this year, shares have seen a price change of 7.1%. The power company is paying out a dividend of $0.38 per share at the moment, with a dividend yield of 4.43% compared to the Utility - Electric Power industry's yield of 3.18% and the S&P 500's yield of 1.57%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.51 is up 7.9% from last year. Over the last 5 years, NRG Energy has increased its dividend 3 times on a year-over-year basis for an average annual increase of 101.82%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. NRG's current payout ratio is 23%, meaning it paid out 23% of its trailing 12-month EPS as dividend.
NRG is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2023 is $4.79 per share, with earnings expected to increase 82.82% from the year ago period.
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. However, not all companies offer 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. With that in mind, NRG is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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NRG Energy, Inc. (NRG) : Free Stock Analysis Report
