NorthWestern: Over 4% Yield And Undervalued

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NorthWestern Corporation (Nasdaq:NWE) is a regulated utility that operates in the Upper Midwest and Great Plains of the U.S. Of the utilities I follow, it currently has the second highest yield of approximately 4.3%.

The stock price is still down since it reached all-time peak just before the spread of the COVID-19 pandemic in the U.S. In fact, the stock price has been trading between roughly $50 and $60 per share since April 2020 and has gone essentially nowhere while the rest of the market has recovered and then some. NorthWestern is still down -18.6% year-to-date while the utility industry is up over 11% YTD. This is an opportunity and there is also a lot to like here. NorthWestern is well run, operates in an area of the country with a growing population, the utility is reducing the risk for capacity deficits, and it has an attractive yield of over 4% with decent dividend safety. For investors seeking income, dividend growth, and some capital appreciation, I view the stock as a long-term buy.

NorthWestern Corporation

Overview of Northwestern

NorthWestern Corporation was founded in 1923. Today, the company does business as NorthWestern Energy supplying both gas and electricity to consumers and businesses in the Upper Midwest and Great Plains. Its service area includes Montana, South Dakota, and Nebraska. NorthWestern has 379,400 electricity and 201,500 natural gas customers in Montana, 63,800 electricity and 47,500 natural gas customers in South Dakota, and 42,600 natural gas customers in Nebraska. The utility also provides service to Yellowstone National Park. Total electricity transmission and distribution lines are 28,310 miles. Total owned power generation capacity is 1,278 MW from wind farms, hydro power, coal plants, and natural gas peaking units. About 58% of power (owned and contracted) is carbon-free from renewables. Total natural gas transmission and distribution lines are 9,483 miles. The utility also has about 17.75 bcf of gas storage capacity and 47.2 bcf of proven natural gas resources. Total revenue was $1,258 million in 2019.

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