Today, we look at an energy company known for its long history and modern approach that goes beyond traditional energy. It not only offers stable dividends, but also invests in the future through renewables and technological innovation. Wondering what makes this company so unique? Let's take a look at a few key highlights that are sure to interest you.

Highlights that will interest you

• Dividend King: The company analyzed today has been raising dividends continuously for 68 years, making it one of the absolute top dividend yielders.
• Record Delivery: In January 2024, it achieved a record daily delivery of 9.0 million therms during a winter storm, a testament to the reliability and efficiency of its infrastructure.
• Customer support: Over the past 20 years, it has credited its customers with savings in excess of $250 million through efficient inventory and capacity management.
• Growth and Expansion: With the addition of nearly 15,000 new connections in the past 12 months and strategic expansion into the recycled water market, the company is demonstrating its commitment to growth and innovation.
• ZFive $150 million share repurchases announced in May.

Company introduction

Northwest Natural Holding $NWN is a major energy company that has a long and rich history dating back to the 19th century. It was founded in 1859 in Portland, Oregon, and originally focused on gas distribution. Over time, NW Natural has grown and diversified its operations to better serve its customers and respond to changing energy needs.

NW Natural's primary business is natural gas distribution. The company serves more than 2.5 million customers in Oregon and southwest Washington. Natural gas is used by residential, commercial and industrial clients, contributing to the company's broad customer base and stable revenues. Natural gas is valued for its efficiency and lower environmental impact compared to other fossil fuels, making NW Natural an important player in sustainable energy.

In addition to natural gas distribution, NW Natural is also involved in other areas of the energy industry. The company is investing in infrastructure that enables the development of renewable energy sources such as biogas and hydrogen. In doing so, it seeks to contribute to the decarbonisation of the energy sector and promote long-term sustainability. NW Natural also offers its expertise in energy consultancy, helping its clients to optimise their energy use and reduce costs.

One of the key aspects that make NW Natural interesting is its commitment to innovation and sustainability. The company actively works to develop new technologies and solutions that can contribute to environmental protection and energy efficiency. NW Natural is also dedicated to supporting the communities in which it operates and invests in various social and environmental projects, earning the trust and respect of its customers and the wider community.

NW Natural's history is one of success and innovation. Since its inception in 1859, the company has passed many significant milestones, including upgrading infrastructure, expanding services and introducing new technologies. With its long history and experience, NW Natural has become one of the region's energy leaders.

As a result, NW Natural is not only a stable and reliable energy company, but also an innovative leader in sustainable energy and community support. Its commitment to protecting the environment and supporting its customers makes it one of the most important players in the energy sector on the West Coast of the United States.

What makes the company interesting?

The company also Operates 5.7 billion cubic feet of Mist gas storage, which is contracted with other energy companies and third-party marketers:

• It offers natural gas asset management services
• Operates a retail appliance center
• And engages in gas storage, water, unregulated renewable natural gas and other investments and activities
• The company provides Natural gas services approximately:
• 786,000 feet in Oregon and southwest Washington
• Water service to approximately 80,000 people through approximately 33,000 water and sewer connections in the Pacific Northwest and Texas

Interesting fact

Vanguard Group Inc. boosted its position in Northwest Natural Holding by 1.5% in the latest quarter, according to the company in its most recent 13F filing with the SEC. The institutional investor owned 4,350,387 shares of the utilities provider's stock after buying an additional 65,443 shares during the quarter. Vanguard Group Inc. owned approximately 11.55% of Northwest Natural worth $169,404,000 as of its most recent filing with the SEC.

- Vanguard Group is a U.S. equity investment management firm with $7.7 trillion in assets under management as of April 2023.

1Q 2024 Results

The company reported net income of $63.8 million, or $1.69 per share. This result is lower than the same period in 2023, when the company reported net income of $71.7 million, or $2.01 per share.

One positive was the addition of nearly 15,000 new gas and water connections in the past twelve months, representing 1.7% growth as of March 31, 2024. This growth was primarily driven by strong acquisitions in the water services sector.

At the beginning of 2024, customers in Oregon received bill credits of nearly $30 million. Over the past 20 years, NW Natural Holdings has credited its customers with savings in excess of $250 million through its Mist storage facilities and pipeline capacity management.

In January 2024, customers and the region could rely on the gas system during a winter storm. The company delivered a total of 9.0 million therms on January 13, 2024, of which 8.0 million therms were delivered to homes and businesses, setting a new record for daily delivery as well as a new record for withdrawals from Mist's Oregon storage facility.

NW Natural Holdings was recognized as one of the World's Most Ethical Companies® by Ethisphere for the third consecutive year. The company also reaffirmed its outlook for 2024, with a goal of earnings in the range of $2.20 to $2.40 per share and long-term earnings per share growth of 4% to 6% per year from 2022 to 2027. Earnings per share were $2.54 in 2022.

The Company's Chief Executive Officer, David H. Anderson emphasized that the company's success is a credit to its employees, who ensured a smooth gas supply for the entire region during the winter storms in January. According to Anderson, the delivery of safe and reliable power during the coldest days of winter is the result of disciplined planning and investment in the system.

The results reflect higher pension plan expenses, depreciation expense due to continued investment in the system, and interest expense for gas utilities.

During the first three months of 2024, the Company generated $125.0 million from operating activities, down from $176.9 million for the same period in 2023. The Company used $82.5 million for investing activities, primarily for capital expenditures for gas utilities, compared to $73.0 million for the same period in 2023. As of March 31, 2024, NW Natural Holdings had $72.4 million in cash.

Analysts' view on the company

Analysts forecast an average growth rate of 7.5% for the next five years as NW Natural pushes through approved rate increases and continues to win customers. NW Natural also has its water division, which will deliver modest growth, but higher profits will come primarily from customer and price growth as the company invests in its water business for long-term growth.

NW Natural's quality metrics have been very stable over the past decade. Approximately 76% of its total assets are encumbered by debt, which is quite acceptable for the utility sector. Interest coverage is relatively strong at 3.6, so there are no future funding concerns.

Dividend

The payout ratio is around three-quarters of earnings, which is a significant improvement over previous years. The dividend has been increased for 68 consecutive years, while NWN shares currently yield 5.5%.

What is the company doing for future growth?

NW Natural Water Company, LLC, a subsidiary of Northwest Natural Holding Company, announced the acquisition of Infrastructure Capital Holdings (ICH), including the assets of Puttman Infrastructure.

The move will add approximately 4,200 customers in Oregon, Idaho and California with an expected increase to 19,000 connections. At the same time, Tom Puttman, current president of Puttman Infrastructure and ICH, will become president of NW Natural Water.

This acquisition marks NW Natural Water's first foray into the recycled water market and its entry into the California market. It also marks an expansion of the company's portfolio of utility and service companies. Justin B. Palfreyman, president of NW Natural Holdings, emphasized the strategic expansion into the recycled water market and the potential for further investment in high-growth areas.

Key Metrics

With a market capitalization of $1.34 billion and a share count of 38.03 million, Northwest Natural Holding Company (NW Natural) is a mid-sized utility company. The company reported revenues of $1.17 billion, indicating a stable revenue base that is bolstered by regular and predictable natural gas and water revenues in Oregon and Southwest Washington.

With an average daily trading volume of 250.57k shares and a current volume of 130.02k shares, it is clear that NW Natural's stock is not extremely volatile, which is typical for utilities as investors view this region as a safe haven with regular income.

The company's valuation is reflected in financial ratios such as P/E (15.53) and P/B (0.99), indicating that investors are paying a relatively fair price for each unit of earnings and book value per share. The P/S ratio of 1.15 also indicates that the company's market capitalization is reasonably related to its earnings.

The D/E (1.24) and D/C (0.55) debt ratios reveal that the company is using a relatively high level of debt to finance its operations and growth, which is common in the utility sector where capital expenditures on infrastructure are significant. Despite this debt burden, NW Natural is able to generate sufficient profits to cover its interest costs, as confirmed by its return ratios: ROA (1.77%), ROE (6.76%) and ROIC (3.60%).

The company's margins show that for every dollar earned, 7.36% remains as net profit after sales and operating expenses. The gross margin of 25.63% and operating margin of 12.69% are relatively solid, indicating efficient cost management and stable income from core business.

However, the free cash flow (FCF) is -8.23%, indicating that the company is investing heavily back into its business, likely for infrastructure upgrades and expansion. Still, NW Natural is able to provide an attractive dividend yield of 5.53%, which corresponds to a payout ratio of 79.70%, meaning it pays out most of its earnings to shareholders in the form of a $1.95 per share dividend.

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