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Gas Natural, Stability In An Increasingly Volatile Market

|About: Gas Natural Inc. (EGAS)

Sometimes simple is better, and finding stocks that offer dividends and are stable provide the most prudent investment approach. This week, Fitch issued a new GDP forecast and has declared that the global economy is lagging the financial recovery. The rating agency cut global growth forecasts to 2.2 percent in 2013 and 2.8 percent in 2014, from their last estimates of 2.4 percent and 2.9 percent respectively. The divergence in the EU/U.S. growth paths is once again reinforced, despite lower estimates for both areas in 2013. For the EU, GDP is expected to contract by 0.5 percent from the fall of 0.1 percent previously, while the U.S. is set lower at 1.9 percent in 2013 from 2.3 percent. Their 2014 U.S. growth estimate remains unchanged at 2.8 percent, while their EU estimate was revised down to 1 percent.

Fitch is cutting its global growth forecast but the optimism in the markets is not faltering at all. Most folks remain bullish, and Alan Greenspan was on television this past week stating that "irrational exuberance" is not a characteristic of this market. He mentioned that the stock market is catching up and is still undervalued despite its recent run upwards. The former chairman went on to note that other factors, such as politic drama and temporary headwinds, have held back the equity markets from rising further. "The rally instead has been driven in part by the temporary removal of tail risks, such as concerns over a euro-zone implosion as a result of the region's debt crisis."

Since November, all major indexes have appreciated considerably, making this a very difficult market to put new money to work, even though so many folks are bullish. Most analysts' project that the markets will go higher, some believe that it is fairly priced, while a select few still believe that a correction is warranted. Purchasing more defensive-oriented stocks may be the wisest investment at this time, simply due to the lofty trading levels of most equities and the speed at which the prices have appreciated. The argument still stands that stocks are cheap on a historical basis. That said, the economy is in unchartered territory after such a dramatic downturn as a result of the real estate crash.

Gas Natural (NYSE: EGAS) provides natural gas to about 70,000 customers in Montana, Wyoming, Ohio, Pennsylvania, Maine, North Carolina and Kentucky. The company has been around for over 100 years and currently pays a dividend of $0.045 per share. The company's main strategy is to expand in the Maine and North Carolina markets while looking for acquisitions that are either adjacent to its existing utilities or in under saturated markets.

Last year, through its subsidiary Penobscot Natural Gas Company, Inc., it closed on its previously announced acquisition of a leasehold interest in a 189-mile pipeline corridor easement running from Searsport to Limestone, Maine and various parcels of land. The CEO mentioned that "We have successfully converted a former liquid pipeline to natural gas uses in Ohio and given that experience, we expect we can be equally successful in the recondition and conversion of the Maine assets. The conversion of this pipeline will be done in phases, and we believe will position us well to capture additional opportunities, specifically the industrial base in northern Maine as well as accompanying residential and commercial areas where natural gas is currently not available."

Through the company's acquisitions the company is expected to grow earnings over the coming quarters. EGAS provides stability in a market where volatility is expected to increase. The stock is trading just above $10 per share, below its 52-week high of $11.68. With a dividend yield of 5.40 percent and a market cap of $84 million, EGAS could be nice small-growth investment to park some cash.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.