AGL Resources - A Premier Utility in a Niche Industry - Analyst Blog

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On June 20, Zacks Investment Research upgraded Atlanta, Georgia-based energy services holding company AGL Resources Inc. ( GAS ) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

AGL Resources is a premier gas distribution utility with relatively low risk earnings growth and an expanding dividend that yields a solid 3.6%.

Detailed Analysis

Positioned in a niche industry with high barriers to entry, this energy services holding company enjoys near-monopoly status in its area of operation. On top of this, the utility's best-in-class cost control and recession-proof business model presents a unique opportunity to own a safe stock. Sporting a low beta - translating into less volatility - and a reasonable valuation, we see AGL Resources as an attractive investment in the energy infrastructure space.

The 2011 acquisition of Nicor Inc. has significantly expanded AGL Resources' scope, scale and geographic reach. The merged entity is the biggest gas-only distributor in the nation with a large customer base (about 4.5 million) and an enviable supply position that includes access to eight interstate pipeline connections and significant underground storage assets.

The impending sale of AGL Resources' Tropical Shipping business will not only allow the company to concentrate on its core regulated natural gas assets but also reduce the unpredictability surrounding its future cash flows.

Finally, AGL Resources - one of the major distributors of natural gas in the nation along with the likes of Atmos Energy Corp. ( ATO ) - pays an annual dividend of $1.96 per share, yielding an attractive 3.6%. The utility increased its dividend payout by 4.3% in February 2014, marking the 9th consecutive year of dividend increases. AGL Resources has a long and consistent dividend paying record. The company has paid dividends in each of the last 266 quarters for more than 60 years. As such, we believe AGL Resources' dividend to be safe and reliable.  

Other Stocks to Consider

Apart from AGL Resources, investors interested in the same sector may consider stocks like National Fuel Gas Co. ( NFG ) and New Jersey Resources Corp. ( NJR ). Both these stocks carry a Zacks Rank #1 (Strong Buy).


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

AGL RESOURCES (GAS): Free Stock Analysis Report

ATMOS ENERGY CP (ATO): Free Stock Analysis Report

NATL FUEL GAS (NFG): Free Stock Analysis Report

NJ RESOURCES (NJR): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: GAS , ATO , NFG , NJR

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