AltaGas: An Interesting Combination Of Midstream And Utility

2025-04-17 15:41:54 ET

Summary

• AltaGas Ltd. operates in midstream energy and utilities, offering stable cash flows and a 3.18% yield, higher than the S&P 500 and MSCI Canada indices.
• Despite trailing peers in total return over ten years, AltaGas has outperformed Canadian midstream peers in the past three years, suggesting potential for future growth.
• AltaGas's utility segment faces challenges in Washington, D.C., but opportunities exist in Michigan and from data center growth in Ashburn, Virginia.
• The company is well-positioned to supply LPG to Asia, which is a market with significant forward growth potential.
• The company has a reasonable financial structure and ATGFF stock is fairly valued compared to peers, though not significantly undervalued, making it a stable investment option.

AltaGas Ltd. ( ATGFF ) is an energy infrastructure company based in Canada that operates in two segments. These two segments are midstream energy and utilities:

Both midstream energy and utilities are sectors that I have written extensively about for good reason. In short, companies that operate in these two sectors tend to enjoy remarkably stable cash flows all through the business cycle, and they tend to possess fairly high dividend yields. AltaGas is no exception to this, as its 3.18% current yield is significantly higher than that of either the S&P 500 Index (SP500) ( SPY ) or the MSCI Canada Custom Capped Index ( EWC ):

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