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Atmos Energy Corporation’s ATO strategic investment plans should further increase the safety and reliability of its natural gas pipelines, distribution and transportation systems, and drive its performance. Given its growth opportunities, ATO makes for a solid investment option in the utility sector.

Let’s focus on the factors that make this Zacks Rank #2 (Buy) company a strong investment pick at the moment.

Growth Projections & Surprise History

The Zacks Consensus Estimate for fiscal 2024 earnings per share (EPS) has increased 0.5% to $6.59 in the past 90 days.

The Zacks Consensus Estimate for fiscal 2024 sales indicates a year-over-year increase of 16.3%.

The company’s long-term (three to five-year) earnings growth rate is 7%. It delivered an average earnings surprise of 1.2% in the last four quarters.

Return on Equity

Return on equity (ROE) indicates how efficiently a company has been utilizing the funds to generate returns. Currently, Atmos Energy’s ROE is 8.62%, higher than the sector’s average of 8.46%. This indicates that the company has been utilizing the funds more constructively than its peers in the utility sector.

Debt Position

Currently, ATO’s total debt to capital is 40.08%, better than the industry’s average of 49.64%.

The time-to-interest earned ratio at the end of first-quarter fiscal 2024 was 8. The ratio, being greater than one, reflects the company’s ability to meet future interest obligations without difficulties.

Dividend History

Atmos Energy has been increasing its annual dividend for 40 consecutive years. Currently, its quarterly dividend is 80.5 cents per share. The dividend for fiscal 2024 is $3.22 per share, indicating an 8.8% increase from the prior-year level.

The company aims to increase its dividend by 6-8% per year through fiscal 2026, subject to the approval of the board of directors. Atmos Energy’s current dividend yield is 2.77%, better than the Zacks S&P 500 Composite’s 1.3%.

Systematic Investments

Atmos Energy has a sturdy capital expenditure plan, which helps it to increase the safety and reliability of its natural gas pipelines. A major portion of its planned capital expenditure is utilized to improve the safety and reliability of its distribution and transportation systems.

The company invested $2.8 billion in fiscal 2023, 85% of which was allocated to safety and reliability. The company expects $2.9 billion in capital expenditures during fiscal 2024.

In the past six months, Atmos Energy’s shares have risen 6% compared with the industry’s 4.9% growth.

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Other Stocks to Consider

A few other top-ranked stocks from the same sector are MDU Resources MDU, Pinnacle West Capital Corporation PNW and Unitil Corporation UTL, each holding a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

MDU’s long-term earnings growth rate is 6%. The Zacks Consensus Estimate for MDU’s 2024 EPS stands on par with the bottom line reported in 2023.

PNW’s long-term earnings growth rate is 7.55%. The Zacks Consensus Estimate for PNW’s 2024 EPS implies an improvement of 7.9% from the bottom line recorded in 2023.

The Zacks Consensus Estimate for UTL’s 2024 EPS implies an improvement of 3.6% from the bottom line registered in 2023. UTL delivered an average earnings surprise of 12.8% in the last four quarters.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.