NJR Blends Growing Dividends With Share Price Potential to Outperform

New Jersey Resources Corp (NYSE: NJR) has several positives, which should enable the stock to outperform most other stocks in the gas distribution sector, Argus’ Gary Hovis said in a report. He reiterated a Buy rating for the company, while raising the price target from $40 to $42.

Analyst Gary Hovis commented that New Jersey Resources’ fundamentals were robust, and the current share price offered “a favorable entry point.”

“We view New Jersey Resources as a stable, regulated utility with strong and well-managed nonregulated operations that should provide investors with growing dividend income and the potential for moderate share price appreciation,” Hovis wrote.

Positive Investment Factors

The company is expected to generate earnings growth of 4-5 percent. Total returns to shareholders, including the dividend, is estimated at 5-6 percent. Moreover, commercial and industrial demand may be boosted by the relatively low wellhead natural gas prices.

“We note that the company’s regulated gas distribution activities are complemented by a well-balanced portfolio of potentially-higher-return nonregulated operations,” the analyst mentioned. He added that the company was poised to benefit from favorable demographics and the ongoing shift to gas heating in New Jersey and elsewhere in the Northeast.

Hovis expects New Jersey Resources to continue investing its cash flow in infrastructure projects, which would boost returns over time. He added, “We view the company’s visible forward earnings stream and attractive integrated structure, along with management’s demonstrated execution ability, as compelling reasons for investors to own NJR shares.”