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4 Reasons to Add Atmos Energy (ATO) to Portfolio Right Now

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Atmos Energy Corp. (ATO - Free Report) through the solid contribution from residential customers, returns within one year of investment, customer additions and planned capital investments makes a strong case for investments in the utility space.

Let’s focus on the factors that make this Zacks Rank #2 (Buy) stock a strong investment pick at the moment.

Growth Projection& Surprise History

The Zacks Consensus Estimate for fiscal 2022 earnings has moved up by 1% in the past 60 days to $5.52 per share. Revenue estimates for 2022 of $4.08 billion imply year-over-year growth of 19.7%

Atmos Energy delivered an average earnings surprise of 4.4% in the last four quarters.

Atmos Energy’s long-term (three to five years) earnings growth is projected at 7.3%.

Dividend

Atmos Energy has a long history of dividend payment and has paid dividends to shareholders consecutively since 1988. Atmos Energy aims at increasing the dividend rate annually in the range of 6-8%through fiscal 2026, subject to the approval of the Board of Directors. ATO has raised dividends annually for 38 consecutive years. The new dividend for fiscal 2022 is $2.72, which represents an 8.8% increase from fiscal 2021.

Currently, Atmos Energy has a dividend yield of 2.5% compared with the Zacks S&P 500 composite's average of 1.5%.

Regular Investments & Emissions Reduction

Atmos Energy invested $684.2 million in the first quarter of fiscal 2022 to strengthen operations. Nearly 88% of the capital spending was associated with system safety and increased reliability of services. ATO plans to invest in the range of $2.4-$2.5 billion in fiscal 2022 and also estimates the five-year investment plan in the range of $13-$14 billion for the fiscal 2022-2026 period.

The planned capital investment will allow Atmos Energy to lower methane emissions by 15-20% in the next five years. The company aims at lowering methane emissions by 50% by 2035 from 2017 levels.

Debt Position

The Debt to Capital of Atmos Energy at the end of the first quarter of fiscal 2022 was 48.98% compared with the industry average of 49.12%. It indicates that ATO is using comparatively lower debts to manage the business compared with peers. As of Dec 31, 2021, Atmos Energy had $3.1 billion available liquidity, which is enough to meet the near-term obligations.

The times interest earned ratio of ATO at the end of the first quarter of fiscal 2022 was 10.8, indicating that the company has enough financial strength to meet debt obligations.

Price Performance

In the past three months, the stock has rallied 17.5% compared with the industry’s 8% growth.

Zacks Investment Research
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Other Stocks to Consider

Other top-ranked stocks from the Zacks Utilities sector include Entergy Corp. (ETR - Free Report) , NiSource Inc. (NI - Free Report) and New Jersey Resources Corp. (NJR - Free Report) , each holding a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The long-term earnings growth of Entergy, NiSource and New Jersey Resources is projected at 1%, 7.2% and 6%, respectively.

The Zacks Consensus Estimate for 2022 earnings per share of Entergy, NiSource and New Jersey Resources has moved up 5.2%, 5.1%, and 5.1% year over year, respectively.

In the past three months, ETR, NI and NJR’s shares have surged 1.6%, 13.6% and 9.6%, respectively.