Is Atmos Energy Corporation Worth a Glance for Dividend-Hungry Investors?


Are you interested in public service shares? Investors may want to stick to utility stocks like superglue on their fingers because they offer great reliability and stability regardless of what happens in the rest of the world. Consumers need public services, and what’s better than the combination of consistency and continuous dividends? You may not be able to suppress a happy sigh as you watch the dividends roll in.



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You’re probably interested in finding the companies that deliver the best results, but is regulated utility Atmos Energy Corporation (NYSE: ATO ) one of them? Let’s take a look at Atmos Energy’s performance this year and in previous years, its history, and the pros and cons that can help you decide whether to add it to your portfolio.

About Atmos Energy Corporation

The early days of Atmos Energy Corporation began in 1906 in Texas as a diversified energy corporation. For many years it was called Pioneer Corporation. In 1981, the company was incorporated and became a natural gas distributor.

The company, now based in Dallas, became Energas in 1983 and became Atmos Energy Corporation in October 1988 and began trading on the stock exchange as ATO. Atmos Energy’s acquisitions have allowed it to expand further, primarily through TXU Gas Company in October 2004, and it is now one of the largest natural gas distributors in the country.

Atmos Energy Corporation engages in natural gas distribution, pipelines and storage in the United States, regulating natural gas distribution and related sales operations in eight states. It distributes natural gas to a wide variety of customers, including for residential, commercial and industrial use. It also owns more than 71,000 miles of underground transmission and distribution networks, while another segment transports natural gas for third parties and manages through its storage tanks.

Pros and Cons of Atmos Energy Corporation

Let’s take a closer look at the exact reasons why you might consider loading up on Atmos Energy Corporation.

Advantages:

Let’s start with the general positives of Atmos Energy Corporation:

  • Superior performance: Atmos has strong returns and has outperformed its peers year to date in 2022. Earnings per diluted share were $4.24 per diluted share as of March 31, 2022, and $2.37 per diluted share in the fiscal second quarter. Consolidated net income was $574.2 million for the six months ended March 31, 2022, and $325 million for the fiscal second quarter. Capital expenditures totaled $1.19 billion, with about 87 percent of capital spending related to investments in system safety and reliability.
  • High prospects and dividends: Diluted earnings per share for fiscal 2022 should be in the adjusted range of $5.50 to $5.60, with capital expenditures of $2.4 billion to $2.5 billion in fiscal 2022, a 8.8% increase compared to 2021.
  • Quality infrastructure: As the nation’s roads, bridges, water and natural gas systems deteriorate, Atmos is on top, replacing pipes across the country, more than its peers. The company has already invested $9 billion in pipeline replacement and will continue to do so, directly impacting shareholders and other stakeholders, including customers.
  • Solid Dividend: With a dividend yield of 2.40%, a long dividend history (38 years), a dividend of $2.72, and a dividend payout ratio of 50.56%, the company is writing a consistent dividend and has been for 38 years. Past history (although there is no guarantee of future performance) indicates that if you had invested $1,000 in April 2012, the stock would have gained more than 200% in the same month of 2022. The stock in company would have been worth nearly $4,000.

Cons:

On the other hand, you may want to consider these drawbacks before purchasing. It’s easy to be a little myopic about the stocks you’re interested in because you have so much hope for each stock’s future. Check out these cons before you buy:

  • Debt: For some investors, the company’s debt-to-EBITDA ratio may not be tolerable. As of December 2021, the company had debt worth $7.92 billion compared to last year’s debt level of $5.12 billion. However, it has cash to offset that amount, more than $300 million. Venture debt and other liabilities can become a problem when companies are unable to meet their debt obligations. If it were to immediately pay off its debt to its creditors, it would likely affect shareholders. The result of infrastructure investment has resulted in negative free cash flow. capital market, as it cannot internally finance its growth projects and dividends.
  • Limited growth opportunities: Being a regulated company, the company has to rely on pipeline and natural gas storage for more robust growth.
  • The natural gas itself: What is the future of natural gas? Although natural gas has been positioned as “better” than many other types of energy sources, renewables are still the name of the game. It may leave a problem in the future prospects of Atmos. It’s a worthy consideration if you’re thinking of keeping Atmos Energy for the long term.

Learn more: How to Invest and Pick Dividend Stocks for Passive Income

Consider Atmos for rewarding dividend yields

Utility stocks can help you weather many market storms if you’re looking for a way to add stability and balance to your portfolio. It may not be a sector that fellow investors may consider due to the ‘holding’ of the utilities sector. Realistically, regulated utilities can’t ride out the excitement that big tech can bring to investors. However, there is a level of security within regional monopolies that cannot be ignored. Atmos’ long-term dividend (36 years), storage and pipeline options, number of shares outstanding, strong fundamentals, decent valuation and more all point to growth and little risk.

If you’re considering adding it to your portfolio, carefully consider whether you should also diversify your holdings. It may be wise to add a wide range of other high dividend fliers or join a conglomerate of ETFs, bonds and other investment options.

Read more: 6 Pros of Dividend Stocks (and 4 Cons) and How to Build a Great Dividend Stock Portfolio



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