New Fortress Energy Stock Gives Dividend Hogs a Big Pay Raise
December 29, 2022
NFE Stock’s Quarterly Payout Hiked to $3.00/Share
It’s nice when companies with high-yield dividend stocks make their shares even more attractive.
New Fortress Energy Inc (NASDAQ:NFE), a regulated natural gas company, has been having a great year. Thanks to high natural gas prices and a chilly start to the winter, New Fortress Energy stock has been significantly outpacing the broader market.
As of this writing, NFE stock is up by 82% year-to-date and 91% year-over-year. Meanwhile, the S&P 500 is firmly entrenched in correction territory, down by 20% since the start of January.
In addition to providing large stock-market gains, NFE stock pays dividends. As you can see in the below chart, New Fortress Energy stock has consistently paid quarterly dividends of $0.10 per share (as represented by the straight red line). That works out to a current yield of less than one percent—certainly nothing to get excited about.
That said, New Fortress Energy Inc recently announced that it plans to give a lot more money to NFE stockholders via dividends and a share buyback program.
The company said it will target yearly cash dividends of approximately 40% of its annual adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA)—effective immediately. (Source: “NFE Announces Update to Dividend Policy, Plan to Return Significant Capital to Shareholders,” New Fortress Energy Inc, December 12, 2022.)
New Fortress Energy Inc declared a quarterly dividend of $3.00 per share, with a record date of January 4, 2023 and a payment date of January 13. This works out to an annual dividend of $12.00 per share, for a yield of 27.4%.
The annualized dividend equates to approximately 40% of the company’s adjusted EBITDA goal for fiscal 2023 of about $2.5 billion.
Chart courtesy of StockCharts.com
About New Fortress Energy Inc
New Fortress Energy is a global integrated gas-to-power infrastructure company that provides energy and development services. The company has two business segments: 1) Terminals and Infrastructure and 2) Ships. (Source: “New Fortress Energy Inc. (NFE),” Yahoo! Finance, last accessed December 28, 2022.)
The company’s Terminals and Infrastructure segment consists of natural gas procurement, liquefaction, shipping, logistics, and facilities—as well as the conversion and development of natural gas-fired power generation. New Fortress Energy Inc’s Ships segment provides floating energy storage vessels, regasification assets, and liquefied natural gas (LNG) carriers, which it leases out under long-term or spot contracts.
The company operates an LNG storage and regasification facility at the Port of Montego Bay, Jamaica; a marine LNG storage and regasification facility in Old Harbour, Jamaica; a micro-fuel handling facility in San Juan, Puerto Rico; a marine LNG storage and regasification facility in Sergipe, Brazil; an LNG receiving facility in La Paz, Mexico; and a facility in Miami.
New Fortress Energy Inc also has terminals and other facilities under development in Brazil, Iceland, and South Africa. Moreover, it expects to deploy the first of five floating LNG units to Altamira, Mexico in mid-2023. The company expects the five floating units to add approximately 7.0 million tons per year of new gas liquefaction capacity by the end of 2024, for a total LNG supply of approximately 9.5 million tons per year.
The company currently has 65 contracts, which have a weighted average length of 15 years.
Healthy Financials
New Fortress Energy Inc is able to juice its dividend and initiate share buybacks because it has been making a lot of money and fortifying its balance sheet.
Wes Edens, New Fortress Energy’s chairman and CEO, noted, “Our business is now generating significant, stable, and growing cash, which we believe affords us the ability to both retain capital necessary to grow and return excess capital to shareholders in the form of meaningful dividends.” (Source: New Fortress Energy Inc, December 12, 2022, op. cit.)
He added, “We are fortunate to have a strong balance sheet and the liquidity we believe is necessary to execute our strategy and achieve our goals, matching long-term LNG supply with long-term power demand around the world.”
New Fortress Energy Inc expects to generate more than $11.0 billion of additional liquidity over the next three years. The company said it will use its additional liquidity to “facilitate accretive investments, including investments in floating LNG facilities and downstream capital expenditures, and to pay significant dividends to shareholders.” (Source: New Fortress Energy Inc, December 12, 2022, op. cit.)
The company’s other objectives include maintaining a durable balance sheet and reducing its leverage ratio to below one by year-end 2025. This would allow management to initiate the aforementioned share buyback program, as well as achieve and maintain an investment-grade rating.
In the third quarter, the company’s adjusted EBITDA were $291.0 million and its net income was $56.0 million. Over the trailing 12 months, its adjusted EBITDA were $1.2 billion and its net income was $271.0 million. (Source: “New Fortress Energy Announces Third Quarter 2022 Results,” New Fortress Energy Inc, November 8, 2022.)
For full-year 2022, the company is on track to meet its adjusted EBITDA goal of about $1.1 billion. For 2023, management recently increased their adjusted EBITDA goal from about $1.5 billion to about $2.5 billion. For 2024, they increased their goal to about $4.0 billion. For 2025, they increased their goal to about $5.0 billion.
The Lowdown on New Fortress Energy Stock
New Fortress Energy Inc is an outstanding natural gas company that has been benefiting from increased infrastructure plans and high natural gas prices.
The company has reported tremendous financial results and raised its guidance for adjusted EBITDA. Now that it has been generating significant, stable, and growing amounts of cash, NFE stock will be returning value to shareholders via ultra-high-yield dividends and—eventually—a share buyback program.
