Portfolio Update
The FiveTwenty portfolio received $75.92 in dividends in the past week. ABBV and PG paid their dividend during the past week.
| Past Week Dividend | $75.92 |
| Current Quarter Dividend (Q4 2021) | $516.96 |
| LifeTime Dividend | $1,618.29 |
| Estimated Annual Dividend | $3,478.44 |
The capital allocation for the week of 11/21/2021 to 11/27/2021 will be used to add to our position in Southwest Gas Holdings (NYSE: SWX).
SWX – Position Update
Since our last check-in on SWX in week 31 of 2021, the company reported Q2 2021 earnings on 08/05/2021 and Q3 2021 earnings on 11/09/2021. Additionally, the share price staid unchanged from $69.93 to $69.94.
| TTM | Prev. Update | 10-year median | |
| Dividend Streak | 15 years | 15 years | |
| Yield | 3.37% | 3.30% | 2.56% |
| Payout Ratio | 54.5%1 | 47.6% | 51% |
| P/E | 16.151 | 14.42 | 18.08 |
1computed using adjusted EPS of $4.33 as of Q3 2021
Q3 2021 earnings report
Did SWX’s latest earnings report raise any warning flags?
For Q3 2021, SWX posted higher revenue but lower net income and EPS compared to Q3 2020. Overall, revenues increased 12.3%, adjusted net income dropped 82.8%, and adjusted EPS were 84.4% lower than the year ago period. Net income and EPS were impacted by higher overall costs compared to the prior year period. The higher costs were driven by higher amortization costs for gas plants in service, higher costs for employee benefits compared to COVID-impacted 2020, and additional expense recorded by Riggs Distler post acquisition. On the positive side however, TTM revenue, net income and EPS as of the end of Q3 2021 were all higher compared to the TTM period as of the end of Q3 2020.
| Revenue (in thousands) | Adj. Net Income (in thousands) | Adj. EPS . | |
| Q3 2020 | $791,226 | $18,273 | $0.32 |
| Q3 2021 | $888,696 | $3,137 | $0.05 |
| % Change | 12.32% | (82.8%) | (84.4%) |
Additional noteworthy developments during the quarter:
- SWX completed the acquisition of Riggs Distler on 08/27/2021.
- In early October the company announced plans to acquire Questar Pipelines.
- On October 27, 2021 Carl Icahn submitted an unsolicited tender offer to acquire the outstanding shares of SWX for $75.00 per share in cash. The company’s Board of Directors rejected the offer on 11/09/20221.
Looking ahead, SWX expects adjusted EPS in the range of $4.00 to $4.10. Including the impacts of cost related to the Riggs Distler and planned Questar Pipelines acquisition 2021 full year EPS are expected to be $3.25 to $3.40. While the acquisition are expected to produce operating losses for 2021 due to the acquisition related transaction cost they are expected to be accretive to earnings in 2022.
Thesis
Why are we adding SWX to the FiveTwenty portfolio?
SWX has continued to grow its revenue every quarter in FY 2021 over the same period in 2020. Furthermore, through the acquisition of Riggs Distler and the planned acquisition of Questar Pipelines the company is expanding it portfolio in both the infrastructure services business and natural gas operations.
We are adding to our position in SWX with the expectation that the company will continue to grow its revenues, net earnings, EPS and dividend payout in 2021, 2022 and beyond.
Previous Articles
Additional Research
- If You Like EPS Growth Then Check Out Southwest Gas Holdings (NYSE:SWX) Before It’s Too Late | Nasdaq
- Southwest Gas Holdings Issues Statement (yahoo.com)
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