Best Ideas for the Month (May) From the Staff at Stockchase
Europe's mild winter depressed natural gas prices and did no favours for nat gas stocks. A year ago, ALA was making new 52-week highs in the wake of Russia's invasion of Ukraine (quagmire, anybody?) That was $7 ago for ALA-T, but AltaGas's processing business continues to be strong as the company lowers debt by selling assets like the Mountain Valley Pipeline and recently Alaskan Utilities (for US$800 million). To be clear, ALA processes nat gas and is a utility, despite its name. Shares bottomed over the winter and have climbed $2 since mid-March to nearly $24. It trades at only 13.78x vs. its five-year average of 24.57x, and pays a hefty 4.73% dividend yield at a 62.55 payout ratio. It just reported a convincing earnings beat of $0.98 well above the expected $0.88 and reiterated positive guidance. There's little downside risk and more upside to come.