Reasons to Add NiSource (NI) to Your Portfolio Right Now
NiSource's (NI) CAPEX plans and a strong liquidity position will likely bolster its operating performance.
NiSource Inc.’s NI focus on strengthening its existing infrastructure and efforts to increase the production of clean energy are likely to boost its performance. Its strong liquidity position is a boon too.
Let’s focus on the factors that make this presently Zacks Rank #2 (Buy) stock a strong investment pick at the moment. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for NI’s 2021 earnings and revenues is pegged at $1.36 per share and $4.94 billion, implying respective growth of 3.03% and 5.60% from the corresponding year-ago reported figures.
The Zacks Consensus Estimate for NI’s 2022 earnings and revenues stands at $1.44 per share and $5.49 billion, implying respective growth of 6.13% and 11.09%, from the corresponding prior-year reported numbers.
Surprise History & Long-Term Earnings Growth
NI has an impressive earnings surprise history. Its trailing four-quarter beat is 2.28%, on average.
NI’s long-term (three to five years) earnings growth is pegged at 6.66%.
NiSource is working on a long-term utility infrastructure modernization program and made capital investments worth $1.8 billion and $1.3 billion in 2020 and during the first nine months of 2021, respectively. NI estimated $40-billion long-term natural gas and electric infrastructure investment opportunities, which are expected to drive earnings beyond 2024.
Long-term debts as of Sep 30, 2021 were $9,188.2 million compared with $9,219.8 million as of Dec 31, 2020. Its times interest earned ratio was 2.92 for the third quarter of 2021, up from 0.92 in the fourth quarter of 2020. NiSource had $1,698.3 million net liquidity available as of Sep 30, 2021, which is adequate to meet its debt obligations.
Moreover, its total debt to total capital improved to 59.38% in the third quarter of 2021 from 62.54% at the end of 2020. It does not have any significant long-term debt refinancing need until 2024. According to credit rating agencies like Moody’s, S&P and Fitch, NI has a stable credit score.
NiSource is set to retire its 100% coal-generating sources by 2028 with reliable and cleaner options at lower costs. NI aims to reduce greenhouse gas emissions by 90% within 2030 from the 2005 levels and will retire its 1,300 MW R.M. Schahfer Generating Station by 2023, replacing the capacity with clean and renewable energy source. NiSource has plans to invest nearly $2 billion in meeting its renewable goals.
In April 2021, NiSource issued $862.5 million worth equity units, net proceeds of which will be utilized to invest in renewable generation, serve general corporate purposes and repay the existing debt.
Other electric utilities also adopting measures to supply clean and reliable energy to their customers include Duke Energy DUK, DTE Energy DTE and Alliant Energy LNT. While DTE carries a Zacks Rank #3 (Hold) at present, LNT and DUK hold a Zacks Rankof 2.
DTE Energy remains committed to reducing carbon emissions of its electric utility operations by 80% within 2040 from the 2005 carbon emission levels. Duke Energy plans to reduce carbon footprint between approximately 55% and 75% through 2035. Alliant Energy aims to retire all its existing coal-fired generation units by 2040 to lower emissions from the 2005 baseline by 50% within 2030.
Consistent performance of NI enabled it to reward its shareholders through annual dividend rate hikes. In January 2021, NiSource’s board of directors approved an increase in its annual dividend by 5%, thus expanding the total to 88 cents per share from the 2020 figure of 84 cents. This brings the quarterly dividend to 22 cents. Also, this hike is in line with NI’s target to maintain the 60-70% payout ratio.
The dividend yield of the utility is 3.22% compared with the industry’s yield of 3.13%.
Return on Equity (ROE)
NiSource’s ROE for the trailing 12 months is 11.32% compared with the industry’s 8.02%, reflecting its efficiency in utilizing its shareholders’ funds.
In the past six months, shares of NiSource have gained 13.1%,outperforming the industry's rally of 9.6%.
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