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4 Reasons to Hold Avista (AVA) in Your Portfolio Right Now

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Zacks Equity Research
·4 min read
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Avista Corporation AVA operates as an electric and natural gas utility company. It provides electric and natural gas services to 400,000 and 367,000 customers, respectively. More than 90% of its revenues is covered by regulatory mechanism. The gradual improvement in economic conditions is likely to increase demand and its customer volume. The company is also expected to benefit from electric and natural gas decoupling rates.

Let’s focus on the factors that make this Zacks Rank #3 (Hold) stock worth retaining in your portfolio. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Growth Projections

The Zacks Consensus Estimate for 2021 and 2022 earnings per share is pegged at $2.09 and $2.25, respectively. The 2021 and 2022 estimates indicate year-over-year growth of 10% and 7.9%, respectively. Estimates for 2021 and 2022 have increased 1.9% and 1.8%, respectively, in the past 60 days.

The Zacks Consensus Estimate for 2021 and 2022 revenues is pegged at $1.36 billion and $1.39 billion, indicating year-over-year growth of 2.8% and 2.7%, respectively.

Regular Investments

Avista makes consistent investments to upgrade and maintain the existing infrastructure, as well as expand operations. The company anticipates investing $415 million in 2021 and more than $1.2 billion during the 2021-2023 time period in utility operations. These investments will increase the reliability of its services and enable it to serve an increasing customer base effectively. The company expects this systematic investment to drive 5-6% rate base growth over the long term.

Regular Dividend Hike & Long-Term Earnings Growth

Currently, the company has a dividend yield of 3.56%, higher than the industry’s 2.89%. It has increased annual dividend rate for five consecutive years. The company’s stable performance ensures an increase in annual dividend payment for shareholders. Its 2021 annual dividend rate of $1.69 per share reflects an increase of 23.4% from 2016 level dividend of $1.37.

The company’s long-term (three to five years) earnings growth is currently pegged at 6.9%.

Prudent Balance Sheet and Liquidity

Avista had $270 million of available liquidity under a $400 million line of credit as of Dec 31, 2020. Other thanthe $250 million debt due in 2022, the company does not have any significant debt maturity in the next 10 years.

The times interest earned ratio at fourth quarter-end was 2.4,which improved sequentially by 10 basis points. This ratio of more than 1 indicates that it has enough liquidity to meet near-term obligations.

Price Performance

In the past six months, the stock has gained 35.6% compared with the industry’s growth of 3%.

Stocks to Consider

Some better-ranked stocks in the same sector include Otter Tail Corporation OTTR, California Water Services CWT and Korea Electric Power Corporation KEP, currently having a Zacks Rank #2 (Buy).

Otter Tail and California Water Services pay regular dividends, thereby ensuring steady income for investors. The current dividend yield of Otter Tail and California Water Services is 3.37% and 1.61%, respectively. Long-term (three to five years) earnings growth of Korea Electric Power is projected at 5%.

The Zacks Consensus Estimate for 2021 earnings for Otter Tail, California Water Services and Korea Electric Power has moved up 0.8%, 3.5% and 2.9%, respectively, in the past 60 days.

Zacks Names “Single Best Pick to Double”

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.

You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.

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Korea Electric Power Corporation (KEP) : Free Stock Analysis Report

Otter Tail Corporation (OTTR) : Free Stock Analysis Report

Avista Corporation (AVA) : Free Stock Analysis Report

California Water Service Group (CWT) : Free Stock Analysis Report

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Zacks Investment Research