We view this buy-rated stock as a stable regulated utility with strong and well managed non-regulated operations that should provide investors with growing dividend income and the potential for moderate share price appreciation, explains Gary Hovis, editor of Argus Research.

We are raising our target price on New Jersey Resources (NJR) to $38, based on several positive investment factors, which, in our view, will help the stock outperform most of the other stocks in the gas distribution sector.

We believe the company’s fundamentals are strong and that the current share price provides a favorable entry point.

The dividend currently yields 2.9%. We expect annual earnings growth at NJR of 4%-5% and total returns to shareholders, including the dividend, of 8%-9% annually.

In addition, the relatively low-wellhead natural gas prices should help to boost commercial and industrial demand.

We note that a well balanced portfolio of potentially higher return non-regulated operations complements the company’s regulated gas distribution activities.

We view the company’s visible forward earnings stream and attractive integrated structure, along with management’s demonstrated execution ability, as compelling reasons for investors to own NJR shares.

Our 2016 fiscal year EPS estimate is $1.80. We are projecting a 2017 fiscal year EPS estimate of $1.85.

NJR recently raised its quarterly dividend by 6.7% to $0.24 per share, or $0.96 annually, for a yield of about 2.9%. We expect dividend growth of 5%-6% annually over the next four to five years.

NJR shares appear undervalued. In our opinion, NJR shares are an attractive holding for investors seeking the security of regular dividend payments and the potential for moderate capital appreciation.

We believe that the company’s financial strength, favorable risk profile, visible forward earnings stream, and attractive, integrated structure make NJR a compelling investment.

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