Piedmont Natural Gas: Dividend Stock Analysis

| About: Piedmont Natural (PNY)
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Piedmont Natural Gas Company, Inc. (NYSE: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.

Disclosure: None