ATO - Northwest Natural: Good Dividend But That Is All

2024-07-01 03:41:00 ET

Summary

• Northwest Natural Holding Company is a utility company providing natural gas and water services in multiple states.
• The company's recent stock performance has been weak, resulting in a high dividend yield of 5.40%.
• The NOAA is projecting a colder-than-normal winter in the Pacific Northwest this year, which should be a tailwind for revenues over the next nine months.
• The company is likely to have to borrow some money to fund high-depreciation projects, which puts downward pressure on net income going forward.
• The company looks fairly valued at best. It might be worth owning for the dividend, but the stock price performance will probably lag.

Northwest Natural Holding Company ( NWN ) is a utility company that primarily provides natural gas services to customers in rural Washington and Oregon. The company also provides water utility services in Idaho, Arizona, and Texas:

As is the case with many utility companies that do not provide electricity services, Northwest Natural Holding is frequently overlooked by the market. After all, many investors believe that electric utilities have much greater growth potential. Indeed, there could be a case for that if generative artificial intelligence ever takes off on the scale that some analysts project. Scientific American recently stated that artificial intelligence alone could use more electricity than some countries by 2027. However, we should not completely ignore natural gas and water utilities like Northwest Natural Holding. This is especially true in northern states because natural gas is much more efficient at heating or cooking than electricity. This results in it being cheaper to use for these purposes. Therefore, it will always be the energy of choice for residential and business customers in those areas. In most cases, there is only one supplier of natural gas. Thus, people migrating to those areas will almost certainly become customers of the company and drive its forward growth....

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