COMPANY DESCRIPTION

AGL Resources is an energy services holding company. Co.'s operating segments includes: distribution operations, which includes natural gas local distribution utilities; retail operations, which markets natural gas to residential, commercial and industrial customers primarily in Georgia and Illinois; wholesale services, which is engaged in asset management and optimization, storage, transportation, producer and peaking services and wholesale marketing of natural gas across the U.S. and Canada; midstream operations, which includes its natural gas storage business; and cargo shipping, which transports containerized cargo from the U.S. and Canada to ports in the Bahamas and the Caribbean.

 

ECONOMIC MOAT

In our opinion AGL’s economic moat is dug from its ownership of a difficult-to-replicate network of natural gas distribution and transmission assets. In exchange for its regulated utilities' service territory monopoly, returns are set by state and federal regulators.

 

OUTLOOK

AGL Resources completed a superior 2014. A retreat in earnings in 2015 is expected.  The company is making a major investment in natural gas pipelines. Its p artnerships, which will bring pipelines into Georgia, New Jersey, and Virginia, will carry lower-cost natural gas to customers. As pipelines have higher allowable returns rates, the investments should increase earning s once finished. These projects are expected to be completed in the 2017-2018 period and will likely allow for accelerated earnings growth. The dividend has been recently raised to $0.51 a share (up 4.1%). This brings the annual payout to $2.04, which is among the highest in the natural gas utilities industry.   AGL’s stock offers decent long-term appreciation potential and a solid and growing dividend ought to make it attractive to new investors.