Why It Might Not Make Sense To Buy National Fuel Gas Company (NYSE:NFG) For Its Upcoming Dividend

National Fuel Gas Company's Dividend Prospects: A Closer Look
National Fuel Gas Company (NFG) has been a reliable dividend payer, but recent trends in its earnings and payout ratio raise concerns about the sustainability of its dividend. Let's delve into the reasons why investors might want to reconsider buying NFG for its upcoming dividend.

Earnings Decline and High Payout Ratio
National Fuel Gas Company's earnings per share (EPS) have been declining, with a year-over-year decrease of 11.11% in 2024. This trend is concerning for dividend investors, as it may limit the company's ability to increase its dividend payments in the future. Additionally, NFG has a high payout ratio of 239%, which indicates that the company is paying out a substantial portion of its earnings as dividends. This high payout ratio suggests that NFG may not have enough retained earnings to reinvest in the business, which could limit its ability to grow earnings and, consequently, its dividend.

Dividend Growth Potential
National Fuel Gas Company's dividend growth rate has been relatively low compared to its peers in the Energy sector. Over the past year, NFG's dividend growth rate was 4.04%, which is lower than the average growth rate of 14.33% for the top 25% of dividend payers in the Energy sector. This low growth rate, coupled with the company's declining earnings and high payout ratio, raises questions about NFG's ability to sustain and grow its dividend in the long term.

Dividend Yield and Volatility
NFG's dividend yield of 3.67% (TTM) is higher than the average of the bottom 25% of dividend payers in the US market (1.85%) but lower than the average of the top 25% of dividend payers in the Energy sector (14.33%). While NFG's dividend yield is attractive compared to the broader market, there may be more attractive dividend stocks within the Energy sector. For instance, EQT (EQTEC) has a lower dividend yield of 1.63% but a higher market capitalization of $26.171B compared to NFG's $5.483B.

Historical Dividend Volatility
National Fuel Gas Company has a historical dividend yield range of 0.753% to 0.98%, with an average yield of approximately 0.85%. This range indicates a relatively stable dividend payment history over the past two years. However, NFG's dividend volatility is higher than that of some of its peers, such as Antero Resources Corporation (AR), which has a historical dividend yield range of 0.5% to 1.5% with an average yield of around 1%.

Conclusion
National Fuel Gas Company's dividend prospects are uncertain, given its declining earnings, high payout ratio, and relatively low dividend growth rate. While NFG's dividend yield is attractive compared to the broader market, there may be more attractive dividend stocks within the Energy sector. Investors should carefully consider these factors before buying NFG for its upcoming dividend and monitor the company's financial performance to ensure that it continues to meet its dividend obligations.