Dividend Growth From The Garden State

| About: New Jersey (NJR)

Forget everything you've heard about New Jersey…well, not everything - just the bad stuff.

For example, there's a stupid TV show about a bunch of meatheads living in the New Jersey coastal area that has denigrated the (otherwise good) reputation of the Garden State.

I live there, so I can tell you firsthand that New Jersey is terrific (except for the taxes).

Take, for example, this utility company. Based in New Jersey, it pays a healthy dividend and has a virtual lock on its market…

It's "Fracking" Awesome

New Jersey Resources (NYSE:NJR) is an energy company serving residential and industrial customers.

The company's reach stretches across the United States and into Canada, but the business it does in New Jersey proper is the backbone of its operation, with a customer base around 500,000 strong and growing, as it converts heating oil customers to natural gas.

Morningstar calls it "one of the best managed and financially secure utilities." And for good reason. As a regulated utility, it's also a virtual monopoly, making costs for competitors to challenge it prohibitive.

The company is also involved in several non-regulated businesses, like storage facilities, solar energy and on-shore wind projects. These activities are growing and adding to the company's bottom line, which could fuel growth.

Plus, the company services some of the wealthiest areas, most of which sport above-average population growth. That means a rising number of deeper pockets and increasing demand.

Powerful Dividend Supply

NJR has a current dividend yield of 3.79%. And you can be confident that its dividend is going to stay strong.

You see, New Jersey Resources has been helping shareholders pay their gas bills through consistent and growing dividends since the late '80s.

There was one dividend cut in Q1 of 2008, but the company got its dividend increases right back on track after that.

The payout was $0.28 per share in Q2 2008, and has grown to $0.40 per share today, giving NJR a five-year average dividend growth rate of 8.45%.

The stock price has also fared very well. Shares of NJR are up 100% over the last decade. That'd be great for a stock that never paid a dividend…

Keeping it Coming

The best news of all is that NJR should be able to continue at this pace.

As Morningstar points out, NJR has a dividend payout ratio of 57%. So it's reasonable to expect additional dividend hikes down the road.

And we all know that natural gas will be an increasingly vital part of the energy picture - in New Jersey, around the country and across the globe - so NJR should remain viable for years to come.

Sure, the stock price could stagnate if growth doesn't meet expectations. But I'm confident that shareholders will continue to enjoy the dividend no matter what…

and I'm optimistic that NJR will grow its businesses and increase the dividend accordingly. Maybe we'll even see the stock climb to its second double in two decades.

Either way, New Jersey Resources is a terrific consideration for any income portfolio.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.