According to a filing with the SEC, the spouse of Piedmont Natural Gas Company, Inc. (NYSE:PNY) Board member Phillip Wright purchased 13,000 shares of the company’s stock on December 27th at an average price of $30.69 per share. We track insider trading activity- including when family members of an insider are buying- because even in these cases buying the stock reduces diversification, which is generally not rational unless there is a good deal of confidence in the company. This is one explanation for why insider purchases tend to be bullish signals (learn more about studies on insider trading). Our database of insider trading filings shows that Wright had previously purchased shares of Aegion Corp (NASDAQ:AEGN), where he also serves on the Board of Directors, at about $16 per share this past June; that stock currently trades at above $21. Research Wright’s insider activity.
Piedmont Natural Gas Company, Inc. is a natural gas utility serving customers in the Carolinas and Tennessee. Its fiscal year ended in October, and the company recently filed its 10-K; revenue was down 22%, due to lower natural gas prices. However, because the utility buys that natural gas in turn, its cost was down a similar amount and so gross margins were flat for the year compared to the last fiscal year. Lower utility interest charges led to moderately higher net income and earnings per share. Piedmont reported $1.66 in EPS, for a trailing P/E multiple of 19 given the current market capitalization of $2.2 billion. That is rather high for most value investors, considering that the company doesn’t have many growth prospects; higher natural gas prices push up revenue and costs alike.
Instead, as with many other utilities, a case for investing rests on the stock’s weak correlation with the broader market- the beta is 0.5- and a dividend yield close to 4%. These traits are appealing to income investors, as well as to defensive-minded investors who want to limit their risk (or who believe that the rest of their portfolio already has plenty of risk). The quarterly dividend payment has increased by a penny each year since 2006, so we feel fairly comfortable that Piedmont Natural Gas Company, Inc. will continue to return cash to shareholders in this fashion. If it increases by 1 cent per share again in 2013, then the forward dividend yield would come in at 4.0%.