Buy AltaGas

Calling it a “wonderful illustration of an invest-to-grow story in process,” chief investment strategist David Dittman is more than a little pleased with second quarter numbers from AltaGas Ltd. (ALA-TSX, $36.18). He’s also “gassed-up” over the company’s two per cent increase in its monthly dividend to $0.13 a share.

When added to the half-cent increase announced April 25, this amounts to a year-over-year dividend increase of 10.9 per cent. The new annualized rate is $1.53 a share, up from $1.38 as of September 2012.

AltaGas reported an 89 per cent increase in operating income – largely from its earlier acquisition of U.S. utilities, as well as from its more recent addition of the new Blythe power facility in mid-May. Earnings, however, were partially offset by lower frac spreads and higher operating costs.

Normalized net income was $35.5 million, or $0.30 a share, for the three months ended June 30. This compares quite nicely to the $10.4 million, or $0.12 a share, the company logged a year ago. Net income, meanwhile, was $35.9 million, or $0.31 a share, up from last year’s $25.8 million, or $0.29.

Alta also announced that its subsidiary, Pacific Northern Gas, inked agreements with two firms for 520 million cubic feet a day of natural gas transportation capacity on the proposed expansion of the Pacific Northern Gas pipeline. This expansion, adds Mr. Dittman, “is a key achievement in AltaGas’ long-term goal of exporting liquefied natural gas from British Columbia.” Elsewhere, AltaGas will expand its Cogeneration fleet at its gas plant at Harmattan, Alta., while building out its natural gas transmission system at Cold Lake, Alta. “Based on the two per cent dividend increase,” says Mr. Dittman, “AltaGas is now a buy” up to US$37.25 a share.



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