Dividend Kings In Focus: National Fuel Gas

Thanks to this steep increase in the output, management expects to grow the earnings per share by about 25% in fiscal 2021, from $2.85 this year to $3.40-$3.70. If National Fuel Gas exceeds earnings per share of $3.45, it will post all-time high earnings per share next year.

It is also worth noting that National Fuel Gas has consistently grown its proved reserves while the recent acquisition added another 700 Bcfe of proved reserves.

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Source: Investor Presentation

The consistent growth of the proved reserve base of National Fuel Gas bodes well for the growth prospects of the company, indicating that the growth potential will not be exhausted next year after the recently acquired reserves begin to contribute to the existing production base.

Overall, we expect National Fuel Gas to grow its earnings per share by about 6.0% per year on average over the next five years, primarily thanks to the strong production growth expected next year and somewhat more favorable prices of natural gas in the future.

Competitive Advantages & Recession Performance

As mentioned above, the upstream segment generates 42% of its total EBITDA, with natural gas comprising 90% of the total output. It is evident that the company is highly sensitive to the price of natural gas. This sensitivity was apparent in 2015 and 2016 when the price of natural gas collapsed and the company posted hefty losses.

On the other hand, thanks to its vertically integrated business model, National Fuel Gas is more resilient to downturns than most oil and gas producers, as its midstream and utility businesses provide a strong buffer during downturns.

The superior business model of National Fuel Gas helps explain its admirable dividend growth record.

Source: Investor Presentation

The company has paid uninterrupted dividends for 118 consecutive years and has raised its dividend for 50 consecutive years. This is an impressive achievement for a commodity producer, as commodities are infamous for their high cyclicality, which results in dramatic boom-and-bust cycles.

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