Avista Hits 52-Week High On Investments, Financial Strength

Shares of Avista Corporation (NYSE:AVA) touched a new 52-week high of $43.00 on Jun 15. The stock eventually closed a little lower at $42.24, having gained roughly 21.6% so far this year and outperforming the 1.3% gain of the S&P 500 over the same period.

Avista has a market cap of $2.67 billion. Over the past 52 weeks, Avista’s shares have ranged from a low of $29.77 to a high of $43.00. The average volume of shares traded over the last three months is approximately 3.2 million.

What’s Driving Avista?

Avista is a diversified energy company with utility and other subsidiaries operating across North America. The company also operates Avista Capital, which owns all of its non-regulated energy and non-energy businesses. It is involved in the production, transmission and distribution of energy as well as in other energy-related businesses.

The company maintains a sound investment strategy, which continues to pay off. In the first quarter, Avista Utilities spent $84.4 million as capital investment and anticipates a total expenditure of around $375 million in 2016. Capital expenditure for Alaska Electric Light and Power Company (AEL&P) is expected to be approximately $17 million in 2016.

Avista is focused on upgrading and maintaining its utility systems in order to provide safe and reliable energy services to its customers. For this purpose, it has to invest huge amounts, which it accumulates by increasing rates. On May 26, Avista filed a request with the Idaho Public Utilities Commission to increase electricity rates. If approved, this will boost the company's annual electric revenues, effective Jan 1, 2017, by 6.3% or $15.4 million.

On the first-quarter earnings call, Avista provided a strong outlook for 2016. The company reaffirmed its guidance for 2016 consolidated earnings in the range of $1.96 to $2.16 per diluted share. Earnings per diluted share are expected to be $1.91–$2.05 at Avista Utilities and 9–13 cents at AEL&P.

As far as investor-friendly moves are concerned, the company maintains a stable dividend payment history. It has paid quarterly cash dividends for 14 consecutive years now, supported by stable liquidity. In Feb 2016, the company’s board of directors approved a 4% hike in the annual dividend to 34.25 cents from 33 cents per share. Avista’s incremental dividend payouts speak volumes about the company’s financial strength. As of Mar 31, 2016, Avista had $90 million in cash borrowing and $46.7 million in letters of credit outstanding. This leaves $263.3 million of available liquidity under this line of credit. The company continues to target growth in the annual dividend payment, consistent with its long-term earnings growth rate.

Avista currently has a Zacks Rank #3 (Hold).

Stocks to Consider

A few better-ranked stocks in the utility space include Spark Energy, Inc. (NASDAQ:SPKE) , NiSource Inc. (NYSE:NI) and CenterPoint Energy, Inc. (NYSE:CNP) . While Spark Energy sports a Zacks Rank #1 (Strong Buy), both NiSource and CenterPoint Energy carry a Zacks Rank #2 (Buy).

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