NiSource Hits 52-Week High - Analyst Blog

On May 22, 2014, shares of diversified utility, NiSource Inc. NI, soared to its 52-week high of $37.34 driven by large-scale modernization ventures, strategic midstream investments and an attractive dividend raise. The shares finally closed at $37.19, up 32.1% from the year-ago closing price.

NiSource continued with its good run by reporting healthy earnings beat in the first quarter of 2014. Increased contribution from all the business wings led to the outperformance. In addition, the company's subsidiaries, Columbia Gas of Massachusetts and Columbia Gas of Ohio witnessed positive rate revisions that lent upside to NiSource's revenue trajectory.

The company's massive electric as well as midstream modernization programs are catching attention. In the first quarter, the company made capital investments of $386.3 million, up 4.6% from the year-ago comparable period. These consistent investments aimed at strengthening infrastructure capacity has boosted the company's service reliability and helped retain the customer base.

In addition, the company rewarded its shareholders with a 4% quarterly dividend hike to 26 cents per share, bringing the annualized dividend to $1.04 per share from $1.00 per share. The increase reflects NiSource's commitment to attain an annual dividend growth target of 3% to 5%, which will further retain investors' interest in the stock.

The current shale explosion in the U.S. is acting as a key demand catalyst for pipeline networks, which explains NiSource's aggressive capital spending in midstream capabilities.

NiSource has several projects lined up for service start-up in 2014 including the critical Columbia Pipeline program which is projected to add 1 billion cubic feet of capacity. In addition, the company received commitments from its customers for availing midstream services from the Rayne and Leach XPress projects.

Together these projects will create outlets for delivering 1.5 billion cubic feet of natural gas to the end markets. Moreover, an improving economic environment in the Indiana service territory will be offering substantial support to NiSource's electric upgrade initiatives.

To sum up, NiSource looks well-positioned for the future as its midstream expansion efforts will garner favorable returns. The recent projection released by ICF International reveals that midstream infrastructure requirements for natural gas in North America will likely be 303,000 miles through 2035.

NiSource currently carries a Zacks Rank #2 (Buy). Other better-placed utility operators include Calpine Corp. CPN, Black Hills Corp. BKH and NRG Energy Inc. NRG. All these stocks currently hold a Zacks Rank #1 (Strong Buy).