RGC Resources Offers 2.4% Yield, 35% One-Year Total Return (RGCO)
By: Ned Piplovic,
RGC Resources, Inc. (NASDAQ:RGCO) continues its long history of paying rising dividends with a 2.4% dividend yield and a one-year total return of more than 35%.
In addition to the rising dividend that missed the annual dividend hike only once in the past two decades, the company’s share price grew more than 25% over the past 12 months and doubled over the past five years.
RGC Resources will distribute its next dividend on company’s May 1, 2018, pay date to all its shareholders of record prior to the April 13, 2018, ex-dividend date.
RGC Resources, Inc (NASDAQ:RGCO)
Founded in 1912 and headquartered in Roanoke, Virginia, RGC Resources, Inc., is a public utility holding company that provides energy and related products. The company sells and distributes natural gas to residential, commercial and industrial customers through its operating subsidiaries — Roanoke Gas Company and RGC Midstream, LLC. Roanoke Gas, which began in 1883, provides natural gas service to more than 60,000 customers in the greater Roanoke Valley region. RGC Midstream operates eight gas metering stations, approximately 1,100 miles of distribution pipelines and a liquefied natural gas storage facility. The company also owns 1% interest in the Mountain Valley Pipeline project.
The company’s current quarterly dividend of $0.155 is 6.9% higher than the $0.145 quarterly payout from the same period last year. This current quarterly distribution converts to a $0.62 annualized distribution for 2018 and currently yields 2.4%. The current 2.4% is 23.6% below the company’s 3.2% average yield over the past five years — mostly because the share price rose more than 25% in just the last 12 months, which suppressed the current yield.
Because of the significant share price growth over the past year, the current yield might not be the best metric to judge this company’s dividend performance against its industry peers. Despite the suppressed yield, RGC’s 2.4% yield is still only 5% below the 2.58% average yield of the overall Utilities sector.
A better indicator of the company’s dividend performance would be the growth rate over the past several years. Over the past 14 consecutive years, the company grew its annual dividend. distribution at an average growth rate of 3.3% per year. Since the current consecutive annual dividend boosts streak started in 2004, the total annual dividend amount advanced 76% from $0.3899 to the current $0.62 annualized amount in 2018
Even over the past 20 years, the company missed the annual dividend hike only once, in 2003. However, the following year — in 2004 — the company paid a special dividend in the amount equivalent of 385% of that year’s total annual dividend. The company’s 3.3% annual dividend average growth rate over the past 14 consecutive years is 14% higher than the 2.9% average growth rate over the past two decades. Additionally, the 5.2% annual dividend growth rate over the past three years is even higher than the average growth rate of the current 14-year hike streak.
The company’s share price experienced a significant growth during the first seven months of the past trailing 12 months (TTM). Starting from its 52-week low of $19.83 on March 23, 2017, the share price advanced 56.7% before reaching its 52-week high of $31.08 on October 11, 2017.
However, after the October 2017 peak, the share price has declined 14.2% by the end of January, and then took another 22% plunge during the last week of January and first week of February 2018, when the entire market declined. After that steep drop that ended on February 5, 2018, the share price regained 62% of those losses and closed on March 21, 2018, at $25.35. This closing price was still approximately 18% short of the October 2017 peak but 27.8% higher than its 52-week low from March 23, 2017 and twice the $12.65 share price from five years earlier.
The share price surge was the main driver of total return over the past several years. Over the past 12 months, RGC Resources has rewarded its shareholders with a 38% total return. Similarly, the total return over the past three years was 93% and over five years the total return came in at more than 126%.
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