Reasons to Add Atmos Energy (ATO) to Your Portfolio Right Now
Atmos Energy Corporation’s ATO systematic long-term investment plans will further increase the safety and reliability of its natural gas pipelines, distribution and transportation systems, and drive its performance. Given its strong dividend history and growth opportunities, the company 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 strong investment pick at the moment.
Growth Projections & Surprise History
The Zacks Consensus Estimate for fiscal 2023 earnings per share (EPS) has increased 0.5% to $6.06 in the past 60 days.
The company’s long-term (three- to five-year) earnings growth rate is 7.25%. It delivered an average earnings surprise of 2.4% in the last four quarters.
Return on Equity
Return on equity (ROE) indicates how efficiently a company has been utilizing the funds to generate returns. Currently, Atmos Energy’s ROE is 8.38%, higher than the sector’s average of 6.41%. This indicates that the company has been utilizing the funds more constructively than its peers in the utility sector.
Debt Position
Currently, ATO’s total debt to capital is 38.55%, much better than the industry’s average of 50.81%.
The time to interest earned ratio at the end of third-quarter fiscal 2023 was 8.1. The ratio, being greater than one, reflects the company’s ability to meet future interest obligations without difficulties.
Dividend History
Atmos Energy has been increasing its annual dividend for 39 consecutive years. Its current quarterly dividend is 74 cents per share. The dividend for fiscal 2023 is $2.96 per share, indicating an 8.8% increase from the previous year’s level. The company aims to increase its dividend in the range of 6-8% per year through fiscal 2026, subject to the approval of the board of directors. Its current dividend yield is 2.57%, better than the Zacks S&P 500 Composite’s 1.44%.
Systematic Investments
ATO’s long-term capital expenditure plan will further strengthen its infrastructure and operations. The company invested $2.45 billion in fiscal 2022, and plans to invest $2.8 billion in fiscal 2023. Capital spending amounted to $2.1 billion for the first nine months of fiscal 2023, 86% of which was allocated to safety and reliability.
Price Performance
In the past six months, Atmos Energy’s shares have risen 0.1% against the industry’s average 6.4% decline.
Image Source: Zacks Investment Research
Other Stocks to Consider
A few other top-ranked stocks from the same sector are TransAlta TAC, sporting a Zacks Rank #1 (Strong Buy), and MDU Resources Group Inc. MDU and FirstEnergy Corporation FE, both carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for TAC’s 2023 EPS indicates a year-over-year increase of 1,912.5%. It delivered an average earnings surprise of 107.1% in the last four quarters.
MDU’s long-term earnings growth rate is 5.77%. The Zacks Consensus Estimate for 2023 EPS has increased 4.6% to $1.36 in the past 60 days.
FE’s long-term earnings growth rate is 6.45%. The Zacks Consensus Estimate for 2023 EPS indicates a year-over-year improvement of 4.6%.
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FirstEnergy Corporation (FE) : Free Stock Analysis Report
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MDU Resources Group, Inc. (MDU) : Free Stock Analysis Report
