Gas utility companies provide a range of services that support the production and distribution of natural gas. These companies are often smaller and less well-known than other utilities. Still, they are an essential part of the industry, and their stocks can be valuable investments for patient investors. This article will look at some gas utility stock ideas with great potential for growth in 2022. A company that operates as a natural gas utility company provides services related to natural gas as its primary business focus. These companies sell natural gas directly to customers or brokers who sell it to end users, such as businesses and residential customers. A wide range of companies falls under this category, from those who operate pipelines, storage facilities, and LNG terminals to those who manage utility operations like billing, metering, communication networks, customer service centers, etc.
Atmos Energy (ATO)
ATO is a diversified energy services company operating in the United States, Canada, and Mexico. Atmos serves about 3.7 million natural gas customers in Texas, New Mexico, Arizona, and Colorado. The company also has non-regulated businesses, which is expected to fuel its growth over the next five years. One of the most attractive features of ATO is its growth potential. The company recently acquired Pecos Valley Partners’ assets, which include natural gas distribution assets in southeast Texas and northeast New Mexico. ATO’s growth is also driven by its low debt-to-equity ratio and attractive dividend yield.ATO has a low P/E ratio of 13.7X and a dividend yield of 4.3%. The company has generated a positive free cash flow of $1.38 billion over the past year. The firm has an impressive long-term growth potential of 10%. ATO has a solid financial position with a debt-to-equity ratio of 0.38 and a current ratio of 2.2.
New Jersey Resources (NJR)
New Jersey Resources (NJR) owns and operates a natural gas distribution business in New Jersey. The company also has a non-regulated subsidiary of power generation assets. NJR’s gas operations have been one of the most profitable businesses for the company over the past few years. The company expects its regulated gas operations to continue to be a significant driver of its earnings over the next few years. The regulated operations are expected to grow from $1.2 billion to $1.4 billion over the next three years.NJR has a strong balance sheet with a debt-to-equity ratio of 0.75 and a current ratio of 2.25. The firm has significant cash flows, which makes it a good investment for a dividend-focused investor. In addition, the company generates substantial cash flows, allowing it to increase its dividend payments to shareholders yearly. As a result, the company has a low P/E ratio of 14.7X.
Brookfield Infrastructure (BIPC)
Brookfield Infrastructure is a utility company that owns energy, logistics, and communications assets. The company operates in Canada, the US, Australia, and the UK. Brookfield also owns a subsidiary of TransCanada, an energy company that owns and operates natural gas pipelines. In addition, the firm has operations in the gas distribution and transmission sectors in the US and Canada. Brookfield’s regulated business has grown significantly over the past few years. The company’s regulated natural gas transmission and distribution operations accounted for nearly 44% of the firm’s revenue in the last quarter. Brookfield also generates a significant portion of its revenue from its non-regulated gas infrastructure and producer services operations. These businesses are expected to fuel the company’s revenue growth over the next few years.
Chesapeake Utilities (CPK)
Chesapeake Utilities is a regulated gas utility company that owns and operates a natural gas transmission and distribution network in Pennsylvania. In addition, the company owns and operates a controlled electric transmission and distribution network in Maryland. Chesapeake’s utility operations account for most of its revenue. The regulated nature of its utility operations means that the company has deficient levels of risk. Chesapeake’s regulated utility operations have been a significant growth driver in recent years. The company expects its utility operations to continue to be an essential growth driver in the coming years. Chesapeake’s regulated utility operations accounted for nearly 70% of the company’s total revenue in the last quarter. The company has a low debt-to-equity ratio of 0.65 and a current ratio of 2.34. The firm has significant cash flows, which makes it a good investment for a dividend-focused investor. The company has a low P/E ratio of 12.5X.
Conclusion
Gas utilities are a great defensive and highly profitable sector, but they also have significant growth potential. These companies have low-risk profiles, and they provide a necessary service. These utilities will continue to be in high demand in the future and likely have low growth rates. Investors interested in gas utilities can consider ATO, NJR, or CPK.
