Investors looking for stability amid the recent market turbulence should consider NiSource Inc. (NI).
This utility offers solid, stable growth prospects as it expands its operations in the Marcellus Shale region. It also pays a dividend that yields a hefty 4.3%.
The company recently reported better than expected results for the second quarter of 2011, prompting analysts to revise their estimates higher for 2011. It is a Zacks #2 Rank (Buy) stock.
Company Description
NiSource Inc. is an energy holding company that distributes electricity, natural gas and water in the Midwest and Northeast United States.
The company was founded in 1912 and has a market cap of $6.2 billion.
Second Quarter Results
NiSource delivered better than expected results for its second quarter on August 2. Earnings per share came in at 17 cents, beating the Zacks Consensus Estimate of 14 cents. It was a 31% increase over the same quarter in 2010.
Revenues rose 8% to $1.181 billion, driven by growth in each segment. The Gas Transportation & Storage division experienced the strongest growth, increasing 16% year-over-year, as the company continues to grow its infrastructure in the Marcellus Shale region.
Meanwhile, operating expenses declined from 54.0% to 51.1% of revenues as the company leveraged its fixed expenses. These factors led to a stellar 18% jump in operating income.
Outlook
Management reiterated its 2011 earnings guidance of $1.25-$1.35 per share following its second quarter results. Meanwhile, consensus estimates inched higher, sending the stock to a Zacks #2 Rank (Buy).
The Zacks Consensus Estimate for 2011 is now $1.34, towards the high end of guidance. This represents 10% growth over 2010 EPS. The 2012 consensus estimate is currently $1.44, corresponding with 8% EPS growth.
Income
NiSource offers investors strong growth potential for a utility, but it also pays a dividend that yields a hefty 4.3%.
The company has paid out the same 23 cents per share every quarter since late 2003.
Shares of NiSource trade at 15.2x 12-month forward earnings, a premium to the industry average of 13.0x. This premium appears to be justified given its strong growth projections.
NiSource’s price to book ratio of 1.2 is in-line with the group.
The Bottom Line
NiSource offers investors solid, stable growth prospects and a hefty 4.3% dividend yield at a reasonable price. This could lead to a strong total return over the long-term.
Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Co-Editor of the Reitmeister Value Investor.
