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Cold Winter In Michigan Good News For Utility CMS Energy

Posted
4/25/2014 6:24:00 PM
By: Investor's Business Daily
Referenced Stocks:CMS

A harsh winter made life difficult for many Michigan residents, but it drove big business at utilityCMS Energy ( CMS ).

The company, with a market capitalization of just over $8 billion, provides electric and gas utility services primarily in Michigan. It also owns and operates independent power generation businesses.

First-quarter earnings on Thursday were solid with profit up 42% from the year-ago quarter to 75 cents a share. Sales jumped 27% to just over $2.5 billion. Results were helped by extreme cold weather, which increased natural gas deliveries and electric sales.

Total gas deliveries at its Consumer Energy subsidiary were 23% above the company's expectations. In Q1, CMS delivered nearly 160 billion cubic feet of natural gas to its 1.7 million customers.

The company's stated strategy is to continue to expand and strengthen its gas distribution, transmission and storage capabilities. Over the next 10 years, CMS plans to invest $5 billion in gas transmission, distribution and storage systems.

In Q1, the company announced plans to acquire a 540-megawatt clean-burning natural gas power plant in Michigan. The deal is expected to close in 2015. Meanwhile, construction continues on a 24-mile natural gas pipeline in Southwest Michigan.

According to CFO Tom Webb, the company's investment model has improved gross operating cash flow by about $100 million each year. Investment hasn't hurt margin either. In 2013, annual pretax margin hit a multiyear high of 13.6%.

CMS energy is showing signs of accumulation and is in the early stages of breaking out of a long consolidation that started nearly a year ago.

Earlier this month, the company announced a quarterly dividend of 27 cents a share, giving it a yield of 3.6%. CMS hasn't been shy about raising its dividend in recent years. It currently boasts a long-term annualized dividend growth rate of 20%.