We recently published a list of Dividend Champions List: Top 15. In this article, we are going to take a look at where Northwest Natural Holding Company (NYSE:NWN) stands in the dividend champions list.
In this dividend champions list, we will take a look at some of the best dividend stocks with at least 25 consecutive years of dividend growth and yields above 4%.
Dividend champions are companies that have raised their dividends for at least 25 years. While they share this trait with dividend aristocrats, the key difference is that dividend champions don’t need to be part of the S&P Index, whereas aristocrats do. Despite this distinction, what truly sets these stocks apart is their long-standing history of consistently increasing dividend payments to shareholders over time.
Dividend growth is one of the most appealing qualities a company can have in today’s market. Achieving 25 consecutive years of dividend increases is especially impressive, as these companies were able to boost their payouts even through challenging periods like the recent pandemic.
Although dividend stocks have lagged behind the market due to the growing prominence of tech stocks, the value of steady income remains irreplaceable. Dividend stocks are unlikely to fall out of favor. Analysts continue to express confidence in their potential. Earlier this year, BofA predicted that dividend stocks are set for growth, noting they should perform well even if consumer spending slows or a full recovery doesn’t materialize. Subramanian from BofA added that if the Federal Reserve cuts rates or halts hikes, companies can maintain their dividends by borrowing at lower interest rates. The analyst also highlighted that income investors have plenty of options for investing in dividend-paying stocks, such as broad mutual funds or exchange-traded funds (ETFs). This provides a variety of avenues to tap into dividend income.
US companies have focused on paying dividends to shareholders due to their growing cash reserves. At the end of the fourth quarter of 2023, businesses held $3.61 trillion in cash and equivalents on their balance sheets. This marked a 2% decline from the end of 2021 but an 11% increase compared to 2022, according to S&P Global Market Intelligence. The substantial cash reserves held by US companies had a significant impact on their dividend payments. A report by Janus Henderson highlighted that US businesses paid shareholders $161.5 billion in dividends during the second quarter of 2024, marking an 8.6% increase on an underlying basis. Companies paying dividends for the first time this year made the largest contribution to this growth, raising the US underlying total by 3.6 percentage points. While these companies’ dividends are relatively small compared to their profits, they still contributed a notable $3.8 billion. Excluding this effect, the remaining companies in the index saw a 5.0% growth, which aligns more closely with the nation’s long-term trend. This surge from new dividend payers is expected to continue throughout the year, keeping US payout growth ahead of the global average. The report further mentioned that 96% of the companies either maintained or increased their dividends during the quarter.
When investing in dividend stocks, many investors tend to prioritize dividend yields. However, experts recommend focusing more on stocks with consistent dividend growth rather than simply chasing high yields, which may not always be sustainable. That said, dividend yields aren’t necessarily a bad option. A balanced approach that combines healthy yields with steady dividend growth can provide strong investment opportunities for investors. In this dividend champions list, we will take a look at the highest-yielding stocks with at least 25 consecutive years of dividend growth.
Our Methodology:
For this list, we looked at a group of over 150 dividend champions, which are known for raising dividends for 25 years or more. From this list, we chose companies with the highest dividend yields as of September 24 and arranged them in order from lowest to highest yield.
We also measured hedge fund sentiment around each stock according to Insider Monkey’s database of 912 funds as of Q2 2024. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A construction worker welding a gas pipeline on a gas storage facility.
Northwest Natural Holding Company (NYSE:NWN)
Dividend Yield as of September 24: 4.88%
Northwest Natural Holding Company (NYSE:NWN) ranks ninth on the dividend champions list. The natural gas distribution company offers a wide range of related services and products to its consumers. In the most recent quarter, the company continued to perform strongly and remains on track for the year. Looking ahead to 2024, its priorities include maintaining safe and reliable operations, executing the capital plan, managing regulatory dockets, and pursuing growth opportunities. The stock has surged by nearly 3% in the past 12 months.
Though Northwest Natural Holding Company (NYSE:NWN) reported an 11% YoY decline in its revenue at $212 million, the company showed progress on various other fronts. The company added nearly 16,000 gas and water utility connections over the past 12 months, resulting in a combined growth rate of 1.8% as of June 30, 2024, largely driven by strong water acquisitions. Additionally, they signed an agreement to acquire Puttman and ICH water, adding 4,200 customers and strengthening their pipeline of growth opportunities.
Palm Valley Capital Management also highlighted strengths in Northwest Natural Holding Company (NYSE:NWN) in its Q1 2024 investor letter. Here is what the firm has to say:
“During the quarter, we purchased Northwest Natural Holding Company (NYSE:NWN). Founded in 1859, NW Natural is a natural gas utility operating in Oregon and Washington. While the company targets long-term earnings growth of 4%-6%, earnings per share in 2024 are expected to decline by 7% to 15%. Earnings are being pressured by above average investments in the utility’s infrastructure and higher than expected inflation. In response, management filed for a rate increase with regulators in December 2023, which would provide the utility with a 10.1% return on equity. If approved, new rates are expected to go into effect in November and should move earnings in 2025 closer to our normalized estimate of $2.80/share. NW Natural is currently trading at 13x our normalized EPS estimate and 1.2x tangible book value—both near historical lows. The firm has increased its dividend for 68 years in a row, and the stock offers a 5.3% yield. While there remains uncertainty related to regulatory decisions and interest rates, at its current price, we believe we’re being adequately compensated for risk assumed.”
Northwest Natural Holding Company (NYSE:NWN) also holds a strong cash position. In the first six months of the year, the company generated over $246 million in operating cash flow. Its cash generation has made it possible for the company to grow its dividends by 68 consecutive years. The company offers a quarterly dividend of $0.4875 per share and has a dividend yield of 4.88%, as of September 24.
Insider Monkey’s database of Q2 2024 indicated that 11 hedge funds owned stakes in Northwest Natural Holding Company (NYSE:NWN), up from 9 in the previous quarter. These stakes are worth over $45.8 million in total.
Overall, NWN ranks 9th on our list of dividend champions. While we acknowledge the potential for NWN as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NWN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.