70 years of dividends and a yield around 4%. Why is this small utility so cheap?
Decades of uninterrupted dividend increases are among the strongest signals of financial stability the stock market offers. Only three companies traded on the New York Stock Exchange can claim to have increased shareholder payouts for 70 consecutive years, and one of them is a regulated gas holding company from the American Northwest.
Key points
The dividend yield around 4% is the highest among comparable gas utilities, yet the stock's valuation is below their average.
A debt-to-equity ratio around 1.7 noticeably exceeds the competition, which is under one, and this is the main explanation for the low valuation.
The goal of growing the regulatory base by 6 to 8% annually through 2030 does not translate into the same pace of earnings per share growth, because the company finances part of its investments by issuing new shares.
The SiEnergy and water segments are expected to contribute roughly a quarter of consolidated earnings in 2026 and are becoming the main growth lever outside traditional Oregon gas.
The Oregon regulator is pushing to limit subsidies for new gas connections by 2027, creating a long-term risk to customer base growth in the company's home state.
The current dividend yield is around 4%, higher than most comparable gas utilities in the US. Despite this, the stock trades at a P/E around 16.5, noticeably less than competitors like Atmos Energy $ATO or ONE Gas $OGS.
A regulated business with guaranteed return on capital, a growing customer base, and expansion into Texas and water should theoretically command a stable, rather pricier valuation. But the stock has long lagged sector indexes, and the main question is whether the market is overlooking a quality business or correctly pricing the risks associated with debt, regulation, and the future of natural gas.
Three businesses in one holding structure
Northwest Natural Holdings, traded under ticker $NWN on the New York Stock Exchange, brings together three regulated businesses with different growth dynamics under one roof.
According to the company's investor presentation, their comparison looks like this:
Segment | Characteristics | Growth rate | Share of 2026 earnings |
|---|---|---|---|
NW Natural (Oregon, Washington) | Classic regulated gas distribution, over 800 thousand metered customers, more than 165 years of history | 1 to 2% annually (customers) | 75% (by calculation) |
SiEnergy (Texas) | Gas distribution in Houston, Dallas, and Austin, acquisition from January 2025 | 15 to 20% annually (customers), backlog of 260 thousand future connections | together with water 25% |
NW Natural Water | Water and wastewater, growth through acquisitions of smaller systems | acquisition-driven, first standalone bond (A- rating) in June 2026 | together with SiEnergy 25% |
According to CFO Ray Kaszuba's remarks on the second quarter 2026 earnings call, SiEnergy and water together are expected to contribute approximately 25% of consolidated earnings per share for the full year 2026. These two segments thus represent the company's main growth lever going forward, not the traditional Oregon gas.
Economics of a regulated utility: how investment turns into profit
The economics of a regulated utility rest on a simple principle, but one that determines the entire investment thesis. The regulator allows the company to include approved capital expenditures in the so-called regulatory asset base, on which the company may then earn a set return on capital. The larger this base and the higher the allowed return, the higher the profit the utility can legally charge customers.
Specific terms vary by jurisdiction:
Oregon (rate settlement from October 2025): return on equity 9.5%, capital structure 50% equity and 50% debt.
MX3, storage project (FERC regulation): fixed return of 12.5% with the same 50/50 capital structure.
The key risk of this model is regulatory lag, i.e., the period between the investment and the moment new rates take effect. In 2024, the company faced this lag noticeably, which led to a decline in adjusted earnings per share from $2.59 in 2023 to $2.33.