Wednesday, October 05, 2011

South Jersey Industries (SJI) 2011 Review

South Jersey Industries (SJI) is a holding company with subsidiaries in natural gas distribution in southern New Jersey and drilling and gathering of natural gas. The company has grown profits and dividends at 6-10% pace over the last ten years earning a 13-15% return on equity. It should continue to increase profitability as well as an enhanced rate of dividend growth as a result of:

(1) recent increase in its base rates,

(2) a rise in the number of profitable projects in its nonutility operations,

(3) growth in its customer base plus an increase in customers converting form other fuels to natural gas,

(4) a rationalization of its nonutility operations to focus on higher profit investments.

The primary negatives are rising operating expenses and taxes.

SJI is rated B++ by Value Line, has a debt to equity ratio of 38% and its stock yield 3.0%

Statistical Summary

Stock Yield Dividend Growth Rate Payout Ratio # Increases Since 2001
SJI 3.0% 9% 48% 10
IND 4.6 3 60 NA

Debt/Equity ROE EPS Down Since 2001 Net Margin Value Line Rating
SJI 38% 15% 1 10% B++
IND 54 10 NA NA


Note: SJI has a very unusual chart. Its high prior to the 2008-2009 decline was made in May of 2007 (straight red line); although the stock touched that level several times after. It bottomed in October of 2008 and the November 2008 trading high (green line) was basically at the same level as the May 2007 high. The stock was in a long term up trend until recently (blue lines). It violated the lower boundary of that trend and appears to have reset to an intermediated term trading range. However, that is still in question because SJI is also in a short term down trend (brown line). The wiggly red line is the 30 day moving average. The Dividend Growth Portfolio owns a full position in SJI. It is currently on the Dividend Growth Buy List. The lower boundary of its Sell Half Range is $83.