SWX - Atmos Energy: This Financially-Solid And Growing Utility Looks Like A Good Buy Today

2024-01-26 00:11:44 ET

Summary

• Atmos Energy is a large natural gas utility serving 3.3 million customers in eight states in the US.
• The company's stock has performed well, outperforming the US Utilities Index over the past few months, making it one of the only utilities to deliver positive returns recently.
• Atmos Energy has a stable cash flow and is well-positioned for earnings growth, making it attractive for conservative investors.
• The company recently unveiled a new growth plan and raised its dividend. Investors should be able to get a 9% to 11% total annual return through 2028.
• The company's valuation is quite reasonable right now, and its financial statements are much stronger than its peers.

Atmos Energy Corporation ( ATO ) is one of the largest pure-play natural gas utilities in the United States, boasting operations in eight states in the central and southern parts of the nation:

The company currently serves approximately 3.3 million customers throughout these states, which is less than we might expect. After all, Texas alone has approximately 30.9 million inhabitants. However, natural gas utilities are a bit different from electric utilities as they do not necessarily serve every customer in a given region. Indeed, far from universal, natural gas is generally only available in areas with somewhat high population density due to the very high cost of running natural gas distribution pipes across a wide area. However, Atmos Energy does still enjoy the general cash flow stability that we normally expect from utilities. This is the biggest reason why they have become fairly popular among retirees and other conservative investors who do not wish to take on excessive amounts of risk....

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