Portfolio Update
The FiveTwenty portfolio received no dividends in the past week.
| Past Week Dividend | $0 |
| Current Quarter Dividend (Q2 2021) | $363.83 |
| LifeTime Dividend | $476.87 |
| Estimated Annual Dividend | $1,953.30 |
The capital allocation for the week of 06/27/2021 to 07/03/2021 will be used to add to our position in MDU Resource Group (NYSE: MDU)
MDU – Position Update
Since our last check-in on MDU in week 2 of 2021, the company reported FY 2020 earnings on 02/03/2021 and Q1 2021 earnings on 05/05/2021. Additionally, the share price increased 18.2% from $27 to $31.92.
| TTM | Prev. Update | 10-year median | |
| Dividend Streak | 30 years | 29 years | |
| Yield | 2.66% | 3.18% | 2.98% |
| Payout Ratio | 41% | 46% | 58% |
| P/E | 15.35 | 14.37 | 18.66 |
Q1 2021 earnings report
Did MDU’s latest earnings report raise any warning flags?
In Q1 2021, MDU grew revenue, net income, and EPS over the same period a year ago. Construction services business and the pipeline business had record earnings. The regulated utilities business benefited from higher natural gas sales volumes. Finally, the construction materials business saw a narrower loss due to a earlier start to the construction season caused by favorable weather. Overall, revenue grew 2.59%, net earnings increased 108%, and EPS were 100% higher compared to Q1 2020.
| Revenue (in millions) | Net Income (in millions) | EPS . | |
| Q1 2020 | $1,197 | $25.1 | $0.13 |
| Q1 2021 | $1,228 | $52.1 | $0.26 |
| % Change | 2.59% | 108% | 100% |
Additional noteworthy developments during the quarter:
- The backlog of work for the construction services business at 03/31/2021 was $1.273 billion.
- The constructions materials backlog of work at 03/31/2021 was $819 million.
- The company continues to await FERC approval for the North Bakken Expansion project related to its pipeline business. The delay will push back the in-service date for the project.
Looking ahead, MDU narrowed FY 2021 EPS estimates to $2.00 – $2.15 from the previous range of $1.95 – $2.15. The company also re-iterated its 5-8% long term CAGR target. And finally it provided guidance for its capital expenditures over the next tree years. ($811 million in 2021, $673 million in 2022, and $595 million in 2023).
Thesis
Why are we adding to our position in MDU?
MDU’s FY 2020 and Q1 2021 results confirmed the strength of its construction materials and services business and the stability of its regulated energy delivery business. Furthermore, MDU’s payout ratio has continued to decrease as its EPS have grown faster than its dividend.
Therefore, we continue to have confidence in the company’s ability to continue to pay and increase its dividends in the years ahead.
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