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Reasons to Add MDU Resources (MDU) Stock to Your Portfolio

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MDU Resources Group’s (MDU - Free Report) planned investments in electric and natural gas utility projects, efficient debt management and strong fundamentals will continue boosting its performance.

Let’s focus on the factors that make this currently Zacks Rank #2 (Buy) stock a strong investment pick at the moment. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Growth Projection

The Zacks Consensus Estimate for 2022 earnings has moved up by 0.5% in the past 60 days to $2.05 per share.

MDU Resources’ long-term (three to five years) earnings growth is projected at 6.9%.

Dividend

MDU has a long history of dividend payment and has been paying out dividends for the past 84 consecutive years. MDU Resources’ current annualized dividend of 87 cents per share is up 1.2% from the last year’s amount of 0.86 cents, marking the 31st consecutive year of an increase.

Currently, MDU Resources has a dividend yield of 3.2% compared with the Zacks S&P 500 composite's average of 1.7%.

Investments & Customer Growth

MDU Resources makes consistent investments to upgrade and maintain the existing infrastructure as well as expand operations to better serve an increasing customer base. It plans to spend $770 million on capital projects in 2022. The capital program is expected to be largely funded by operating cash flows in the range of $550-$600 million. Overall, MDU plans to invest $3,071 million in the 2022-2026 period.

The company is likely to witness 1-2% customer growth in the electric and natural gas segments annually. A steady expansion in the customer base is likely to boost demand and drive its performance in the long run.

Debt Position

The Debt to Capital of MDU Resources at the end of the first quarter of 2022 was 45.9% compared with the industry average of 50.2%. This indicates that the company is using comparatively lower debts to manage the business compared with peers.

Return on Equity

Return on Equity (“ROE”) indicates how efficiently a company is utilizing shareholders’ funds in the business to generate returns. At present, MDU Resources’ ROE is 10.8%, higher than the industry average of 9.6%. This indicates that the company is utilizing the funds more effectively than industry peers.

Price Performance

In the past three months, MDU Resources stock has surged 4.1% against the industry’s 5.8% decline.

Zacks Investment Research
Image Source: Zacks Investment Research

Other Stocks to Consider

Some other similar-ranked stocks in the Zacks Utility sector include South Jersey Industries (SJI - Free Report) , American Electric Power (AEP - Free Report) and WEC Energy Group (WEC - Free Report) .

The Zacks Consensus Estimate for 2022 earnings per share of South Jersey Industries, American Electric Power and WEC Energy Group has moved up 3.1%, 5.3% and 6.3% year over year, respectively.

South Jersey Industries, American Electric Power and WEC Energy Group delivered an average earnings surprise of 101.5%, 2.4% and 8.6%, respectively, in the last four quarters.

In the past six months, SJI, AEP and WEC shares have rallied 29.6%, 7.2% and 2.1%, respectively.

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