Friday, September 24, 2010

Piedmont Natural Gas (PNY) Dividend Stock Analysis

Piedmont Natural Gas Company, Inc. (PNY), an energy services company, distributes natural gas to residential, commercial, industrial, and power generation customers in portions of North Carolina, South Carolina, and Tennessee. It also operates various energy-related businesses, including unregulated retail natural gas marketing, interstate natural gas storage, and intrastate natural gas transportation.

The company is a member of High Yield Dividend Aristocrats index, and has increased dividends for 32 years in a row. At the latest dividend increase for Piedmont Natural Gas, the company raised its distribution by 3.70% in March 2010.

Over the past decade, this dividend stock has delivered a total return of 11.50% per year on average.

The company has also enjoyed a persistent increase of earnings per share, to the tune of 5.70% per year on average since 2000. For 2010 and 2011 analysts are expecting EPS of $1.57 and $1.68.

The annual dividend per share has increased at a rate of 4.50% per annum on average since the year 2000.

The dividend payout ratio has been in a downtrend over the past decade, with short bursts up followed by reaching lower levels afterwards. While the payout ratio is higher than my 50% threshold, it is adequate for a utility company. In other words, the dividend is adequately covered from the strong and consistent revenues and earnings.

The return on equity has stayed in a tight range between 10% and 13% over the past decade.

Overall I find Piedmont Natural Gas Company to be an attractively valued dividend stock. The company trades at a P/E of 13.80 , yields 4%, and has an adequately covered distribution, which has grown above the rate of inflation over the past decade. I would consider initiating a position in the stock at current prices.

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  1. Thanks for the PNY review! A few months ago I found your great blog, and I have been meaning to ask you to do a PNY review. I haven't pulled the trigger on PNY yet, but I wanted to add one thing that your followers will likely find very interesting. If you do a Dividend Reinvestment* with PNY, they offer you a 5% discount off of the normal market price. How awesome is that?! The only company I've found that does something similar is NNN which offers a 1% discount. There may have been one or two others that I can't remember - do you know of any others that offer discounts on reinvestments?

    * I use Fidelity, but others may also offer free Dividend Reinvestment. I called up fidelity and asked them if they would honor the 5% discount, and they were able to confirm that yes, indeed, they would. They use the same "channels" for reinvestment that the company would use for their own direct purchasing plan, ie they contact the company for a reinvestment price so the company is able to respond with their discounted market price (in the case of PNY, 5% discount)


  2. Thanks for posting this! I love your blog!!

    Common Cents

  3. Blaine,

    Check this post out:

    I summarized as many companeis with drip discounts as I could find. They are not all good investment candidates however.

  4. Thanks for that list, I was sure other people had noticed the discounts but I wasn't successful in tracking down a list. Thanks again!


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