Updated 3/11/2025
National Fuel Gas Company (NYSE: NFG) is a long-established player in the energy industry, covering everything from natural gas exploration and production to pipeline transportation and utility distribution. With over a century of history, it has built a reputation for reliability—both in its operations and in its commitment to paying dividends.
For income-focused investors, NFG has a lot to offer. It boasts a solid dividend track record, a stable customer base, and an integrated business model that provides some protection from energy price swings. But like any stock, it’s not without its risks. Let’s take a closer look at what makes NFG a potential dividend portfolio candidate, as well as some areas that warrant caution.
Key Dividend Metrics
📌 Dividend Yield: 2.77%
💰 Annual Dividend: $2.06 per share
📈 5-Year Average Dividend Yield: 3.48%
🔄 Consecutive Years of Dividend Increases: 52
📊 Payout Ratio: 240.48%
📅 Last Dividend Paid: January 15, 2025
⚠️ Ex-Dividend Date: December 31, 2024
Dividend Overview
NFG has been paying dividends for more than half a century, which speaks volumes about its commitment to shareholders. A 52-year streak of increases is no small feat, making it one of the most dependable dividend stocks in the energy sector.
Currently, the stock’s dividend yield sits at 2.77%. While that may not be the highest in the industry, it’s still an attractive option for those looking for stable income. The company’s annual payout has climbed to $2.06 per share, a slight increase from the previous year.
However, there’s a red flag in the form of the payout ratio. At over 240%, NFG is distributing significantly more in dividends than it earns in net income. That’s not a sustainable model long-term, and investors will want to keep an eye on whether the company can improve its earnings to better support these payouts.
Dividend Growth and Safety
The company has a stellar history of dividend increases, but maintaining that growth could become a challenge given its current earnings trajectory.
- Payout Ratio Concerns: With a payout ratio exceeding 240%, the dividend is being funded by means other than net earnings—likely through cash flow or debt. This isn’t necessarily a death sentence for the dividend, but it’s not a great sign either.
- Cash Flow Position: Operating cash flow remains strong at $1.02 billion, which does provide some cushion. However, free cash flow is negative at -$72.29 million, raising concerns about how sustainable these dividend payments are.
- Dividend Growth Rate: NFG has been increasing its dividend for decades, but recent hikes have been modest. If earnings don’t improve, future increases may be smaller—or paused altogether.
Given the company’s long history of maintaining its dividend, it’s unlikely to make drastic cuts anytime soon. But investors should be aware that continued dividend growth will depend on earnings recovering in the coming quarters.
Chart Analysis
Price Trend and Moving Averages
The price action on this chart for National Fuel Gas (NFG) has been in a strong uptrend over the past year, with a clear acceleration in recent months. The 50-day simple moving average (SMA) has been acting as dynamic support, with the stock consistently bouncing off it and continuing its climb. The 200-day SMA is also sloping upward, confirming a long-term bullish trend.
What stands out is the steep rise from early January, where the stock went from trading in the low 60s to surpassing 74. This suggests strong buying interest, likely driven by earnings results, sector strength, or broader market trends.
Volume and Market Participation
The volume profile shows periods of elevated activity, particularly around mid-December and February, where large spikes suggest institutional involvement or major buying interest. Despite this, more recent volume levels appear to have normalized, which could indicate some profit-taking or a pause in momentum.
One thing to note is that volume has not seen an extreme surge during pullbacks, which means there hasn’t been significant selling pressure. As long as that remains the case, the uptrend is intact. However, a volume surge on a down day would be a warning sign that investors are locking in gains.
Relative Strength Index (RSI) and Momentum
The RSI indicator at the bottom of the chart has been in elevated territory, staying above the 50 level for most of this uptrend. Recently, it reached near-overbought levels above 70 but has since started to cool off slightly.
This signals that the stock had strong momentum but is now consolidating rather than continuing straight up. If RSI starts to decline further but the price remains stable, it could be a sign of momentum fading. If RSI rebounds and stays above 60, the stock might have another leg higher.
Recent Candlestick Action
The last five trading days show some hesitation in the rally. The price has been testing the 74–75 zone but isn’t breaking through decisively. There are some longer upper wicks on recent candles, suggesting selling pressure at higher levels. This could mean traders are taking profits or that there’s some resistance forming.
That being said, there hasn’t been a sharp reversal. If the price holds above the 50-day SMA, it may simply be a consolidation before another push higher. However, a break below that level with increasing volume would be a potential warning sign.
Analyst Ratings
📈 Upgrades
🟢 On November 19, 2024, Argus Research upgraded NFG to a strong buy rating. This decision was driven by a strong earnings report that exceeded expectations, highlighting the company’s effective cost management and strategic positioning within the natural gas sector. Analysts expressed optimism about NFG’s ability to benefit from increasing natural gas demand, citing its diversified operations and efficient capital allocation.
📉 Downgrades
🔴 On January 17, 2025, Scotiabank revised its rating for NFG from sector outperform to sector perform. The downgrade was based on concerns about rising operational costs and potential regulatory challenges that could impact profitability. Analysts pointed out that fluctuations in natural gas prices and emerging environmental regulations could create obstacles for future earnings growth.
🎯 Consensus Price Target
📊 The most recent analyst consensus places the 12-month price target for NFG at approximately 76.75, reflecting modest upside potential from current levels. Some analysts have set more optimistic targets reaching as high as 84.00, while others take a more cautious stance, setting projections as low as 64.00. This variation underscores differing opinions on NFG’s ability to manage market conditions, regulatory challenges, and long-term energy demand trends.
These mixed ratings suggest that while NFG has solid operational strengths, external factors continue to influence its long-term growth prospects.
Earnings Report Summary
National Fuel Gas Company (NFG) kicked off its fiscal year with a solid first-quarter performance, showing steady growth across its key business segments. The company posted net income of $110 million, translating to earnings per share of $1.20. That’s a healthy 15% increase from the same period last year, when EPS stood at $1.04. A big part of this improvement comes from the company’s ability to navigate market conditions and keep its operations running efficiently.
How Each Business Segment Performed
- Exploration and Production (E&P) saw a production boost, with total output reaching 85 billion cubic feet equivalent. That’s a 5% increase from the previous year, thanks to strong drilling activity in the Appalachian region. However, natural gas prices dipped, averaging around $2.50 per Mcf, down from $3.00 a year ago, which put some pressure on revenue from this segment.
- Pipeline and Storage had a strong quarter, reporting a 35% jump in net income. A big driver of this growth was the resolution of a key rate case, which allowed for higher rates starting in early 2024.
- Utility Services also contributed positively, with net income climbing 22%. This was largely due to a newly approved rate adjustment in New York that kicked in during October.
Where the Company is Investing
NFG continues to prioritize long-term growth, putting $150 million into capital expenditures during the quarter. A large portion of that investment went toward expanding operations in the Marcellus and Utica shale formations. The company is also modernizing its pipeline infrastructure to improve safety and efficiency while keeping up with regulatory and environmental standards.
What’s Ahead for NFG
With a strong start to the year, NFG has raised its full-year earnings outlook. Management now expects earnings per share to fall between $6.50 and $7.00, an increase from the previous estimate of $6.00 to $6.50. This optimistic adjustment reflects expectations for steady production growth, ongoing infrastructure improvements, and favorable regulatory developments.
Overall, NFG’s latest earnings report paints a picture of a company that’s staying on track despite some challenges in natural gas pricing. By focusing on efficiency, infrastructure upgrades, and steady expansion, the company is positioning itself for continued success in the coming quarters.
Financial Health and Stability
A reliable dividend is only as strong as the company backing it. NFG has maintained stability for years, but its balance sheet raises a few questions.
- Total Debt: $2.89 billion
- Debt-to-Equity Ratio: 104.96%
- Total Cash on Hand: $48.69 million
- Operating Margin: 42.88%
- Return on Assets: 5.69%
While the company is still generating cash, its debt load is on the higher side. A debt-to-equity ratio above 100% suggests that borrowing plays a significant role in funding operations. That’s not necessarily uncommon for energy companies, but it does mean that rising interest rates or lower earnings could make it more difficult to manage obligations.
One concern is that NFG posted a net loss of $10.52 million in the last twelve months. If this trend continues, it could start to put pressure on dividend payments in the future. The company’s ability to turn things around will be key for dividend investors watching from the sidelines.
Valuation and Stock Performance
NFG’s stock is currently trading at $74.19, near its 52-week high of $76.26. This suggests that investors have been relatively optimistic about the stock’s outlook.
- Price-to-Earnings (P/E) Ratio: Forward P/E is 11.01, indicating a reasonable valuation
- Price-to-Book Ratio: 2.44, suggesting the stock is not particularly cheap
- Price-to-Sales Ratio: 3.48, higher than some peers
- Beta: 0.59, meaning the stock is less volatile than the overall market
The stock has had a solid run over the past year, outperforming broader indices. But for dividend investors, valuation is just one piece of the puzzle. The more pressing issue is whether earnings can support continued dividend payments and growth in the years ahead.
Risks and Considerations
NFG has a strong dividend history, but there are a few risks to keep in mind.
⚠️ High Payout Ratio: The company is currently paying out more in dividends than it earns. That’s a risky position, and if earnings don’t rebound, dividend growth may stall or even be cut back.
⚠️ Debt Load: With a debt-to-equity ratio above 100%, NFG is carrying a significant amount of debt. If interest rates rise or cash flow weakens, this could become a bigger issue.
⚠️ Earnings Decline: The company recently reported a net loss and a 66.2% drop in earnings growth year-over-year. If this trend continues, it could put pressure on dividend payments.
⚠️ Energy Market Exposure: While NFG operates across different segments of the natural gas value chain, it’s still dependent on energy prices. A prolonged downturn in natural gas prices could impact profitability.
Final Thoughts
National Fuel Gas Company has built a reputation as a steady dividend payer with over 50 years of uninterrupted increases. That’s an impressive track record, and for many long-term investors, it’s reason enough to consider the stock as a potential income play.
However, recent earnings struggles and a high payout ratio make this a stock that requires careful monitoring. While NFG has the cash flow to sustain its dividend for now, its financial health isn’t as strong as it once was.
For investors seeking stability and a company with a long history of returning capital to shareholders, NFG remains an appealing choice. But those prioritizing dividend safety should be mindful of the potential risks. Watching earnings trends over the next few quarters will be crucial in determining whether NFG can maintain its strong dividend reputation for years to come.
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