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

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MDU Resources Group Inc.’s (MDU - Free Report) planned investments will strengthen its electric and natural gas operations and allow it to provide reliable services to its expanding customer base. Given its growth prospects, MDU makes for a solid investment option in the utility sector.

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

Growth Projections

The Zacks Consensus Estimate for MDU’s 2024 earnings per share (EPS) has increased 0.67% to $1.5 in the past 60 days.

The company’s long-term (three to five years) earnings growth rate is 6%.

Return on Equity

Return on equity (ROE) indicates how efficiently a company has been utilizing its funds to generate higher returns. Currently, MDU’s ROE is 8.84% compared to its sector’s average of 8.46%. This indicates that the company has been utilizing its funds more constructively than its peers in the industry.

Solvency & Liquidity

The time-to-interest earned ratio at the end of the fourth quarter of 2023 was 5.7. The ratio, being greater than one, reflects MDU’s ability to meet future interest obligations without difficulties.

The company’s current ratio at the end of the fourth quarter was 1.27, higher than the industry’s average of 0.61. The ratio, being greater than one, indicates MDU Resources’ ability to meet its future short-term liabilities without difficulties.

Dividend History

MDU has been increasing shareholders’ value through dividend payments. The company has set a new dividend payout range of 60-70%. In February 2024, the company announced a quarterly dividend of 12.5 cents per share, resulting in an annual dividend of 50 cents per share.

MDU Resources has been paying out dividends for the past 85 years. Currently, its dividend yield is 2.01%, better than the Zacks S&P 500 Composite’s 1.29%.

Systematic Investments

Strategic capital investments are making MDU Resources stronger and more resilient. MDU’s capital expenditures for 2023 totaled $536 million. It expects capital expenditures to be $2.8 billion in the 2024-2028 period. These investments should increase the reliability of its services and enable it to effectively serve an increasingly large customer base. The company’s CAGR target for the next five years is 6-7%.

Price Performance

In the past three months, MDU’s shares have risen 25.8% against the industry’s average 2.9% decline.

Zacks Investment Research
Image Source: Zacks Investment Research

Other Stocks to Consider

A few other top-ranked stocks from the same sector are American States Water (AWR - Free Report) , Atmos Energy (ATO - Free Report) and NiSource (NI - Free Report) , each holding a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

AWR’s long-term earnings growth rate is 6.3%. The company delivered an average earnings surprise of 3.12% in the last four quarters.

ATO’s long-term earnings growth rate is 7%. The Zacks Consensus Estimate for Atmos Energy’s fiscal 2024 EPS is pegged at $6.59, which implies a year-over-year improvement of 8%.

NI’s long-term earnings growth rate is 6%. The Zacks Consensus Estimate for NiSource’s 2024 EPS is pegged at $1.71, implying year-over-year growth of 6.88%.

 

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