Unitil (UTL) Could Be a Great Choice

Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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.

Unitil in Focus

Based in Hampton, Unitil (UTL) is in the Utilities sector, and so far this year, shares have seen a price change of -2.29%. Currently paying a dividend of $0.45 per share, the company has a dividend yield of 3.4%. In comparison, the Utility - Electric Power industry's yield is 3.25%, while the S&P 500's yield is 1.53%.

In terms of dividend growth, the company's current annualized dividend of $1.80 is up 5.9% from last year. Over the last 5 years, Unitil has increased its dividend 5 times on a year-over-year basis for an average annual increase of 3.51%. 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. Unitil's current payout ratio is 60%, meaning it paid out 60% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, UTL expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $3.08 per share, representing a year-over-year earnings growth rate of 3.70%.

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.

Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, UTL 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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This article originally published on Zacks Investment Research (zacks.com).

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