Dividend Kings In Focus: Northwest Natural Gas

Updated on July 9th, 2025 by Felix Martinez

Utility stocks are often associated with long histories of paying dividends to shareholders. Their relatively predictable earnings and recession resistance combine to make increasing dividends somewhat easier over the long term than a highly cyclical business.

However, not all utility stocks are created equal in this sense.

Six utility stocks are on the prestigious list of Dividend Kings, a group of stocks that have achieved at least 50 consecutive years of dividend increases. You can see all 55 Dividend Kings here.

You can also download an Excel spreadsheet with the full list of Dividend Kings (plus important metrics such as price-to-earnings ratios and dividend yields) by clicking on the link below:

Dividend Kings In Focus: Northwest Natural Gas

Northwest Natural Holdings (NWN) is among the six utility stocks on the list of Dividend Kings. It has increased its dividend for 69 consecutive years, giving it one of the longest streaks in the market.

Below, we’ll assess Northwest’s business and growth prospects and decide whether to buy, sell, or hold.

Business Overview

Northwest was founded over 160 years ago as a natural gas utility in Portland, Oregon.

It has evolved from a small, local utility that provided gas service to a handful of customers to a successful regional utility with interests that now include water and wastewater, which were acquired in recent transactions.

The company’s locations served are shown in the image below.

Source: Investor Presentation

Northwest provides gas service to ~2.3 million customers in around 140 communities in Oregon and Washington, serving more than 900,000 connections. It also owns and operates underground gas storage capacity.

Northwest Natural Holdings reported Q1 2025 net income of $87.9 million ($2.18 per share), up from $63.8 million ($1.69 per share) in Q1 2024. Adjusted net income was $91.8 million ($2.28 per share), excluding $3.9 million in SiEnergy acquisition costs. Net sales rose 14% to $494.3 million from $433.5 million, driven by the SiEnergy acquisition and new Oregon gas utility rates. Operating income increased 41% to $154.4 million, despite higher depreciation and interest expenses. Operating cash flow grew to $179.6 million from $125 million.

Segment results: NWN Gas Utility net income rose 33% to $87.2 million, with margin up $38.7 million due to Oregon rate increases. SiEnergy, acquired in January 2025, contributed $5.5 million in net income. NWN Water Utility’s net income improved to $1.7 million from a $0.7 million loss, driven by Arizona rate hikes and the Puttman acquisition. Other activities reported a $6.4 million loss, including SiEnergy transaction costs.

The company has closed the SiEnergy acquisition and signed a $60 million deal for Hughes Gas Resources, adding 6,900 Texas customers, which is expected to close in Q2 2025. Capital expenditures totaled $102.2 million, with 2025 projected to be between $450 million and $500 million. NW Natural reaffirmed 2025 adjusted EPS guidance of $2.75–$2.95, updated GAAP EPS to $2.65–$2.85, and maintained a 4–6% long-term EPS growth target. A $0.49 quarterly dividend was declared. CEO Justin Palfreyman emphasized strong utility performance, Texas growth, and customer bill credits of $15 million, positioning the company for sustained growth despite potential tariff risks.

Growth Prospects

Northwest has had difficulty growing earnings per share in the past decade, despite acquiring customers fairly steadily during that time.

The company has struggled with rate cases in some of its localities, although it has recently experienced more success raising prices in Oregon. Since Northwest is a regulated utility, it must ask for pricing increases from local authorities.

Northwest’s customer growth has been quite strong over the past decade. It combines conversions and new construction, both of which have helped move the needle by low single digits over time.

We believe the demographics of the communities Northwest serves support continued customer growth, which should be a tailwind for revenue and earnings.

Source: Investor Presentation

The company believes it can grow earnings per share at 4% to 6% annually while increasing its dividend.

It plans to achieve this by increasing its customer count by at least 1.5% annually, consistent with historical performance, and increasing its rate base by 5% to 7%.

We believe customer growth will be steady, but Northwest’s history on rate cases has us a bit more cautious on rate growth.

Accordingly, we assess Northwest’s long-term growth potential at 4.3% annually in the coming years.

Competitive Advantages & Recession Performance

Northwest’s competitive advantage is similar to that of any other utility; it has a virtual monopoly in its service area. However, the utility business model is vastly different from that of just about any other type of business, as it requires regulatory approval for things like CAPEX and pricing increases.

In return, the company generates a highly predictable and consistent stream of profits from year to year, even during recessions.

Additionally, almost two-thirds of Northwest’s customers are residential. We believe Northwest’s fairly heavy concentration on residential customers will continue to serve it well during future recessions.

Below, we have Northwest’s earnings-per-share before, during, and after the Great Recession:

2007 earnings-per-share: $1.44
2008 earnings-per-share: $1.52 (5.6% increase)
2009 earnings-per-share: $1.60 (5.3% decrease)
2010 earnings-per-share: $1.68 (5.0% increase)

Northwest was able to maintain its earnings during a deep and long recession and produced at least 5% earnings-per-share growth each year before, during, and following the Great Recession.

While utilities can afford to distribute a high level of profits in the form of dividends, given their predictable earnings base, investors should note that increases will likely be small. The most recent increase was just 0.5%, illustrating this point.

We believe the current dividend is safe for the foreseeable future; however, we note that achieving dividend growth will likely be challenging.

Valuation & Expected Returns

At today’s price, Northwest trades for 15 times this year’s earnings, which is inline with our fair value estimate of 15 times earnings. Therefore, we expect a 0% annual decrease/increase in total returns due to the fair P/E multiple.

The current dividend yield is 4.8%, which is significantly higher than Northwest’s historical standards. Combining it with the valuation and expected EPS growth, we forecast total annual returns of 9.1% moving forward.

A mid-to-high single-digit total return potential earns Northwest a hold rating.

Final Thoughts

While Northwest faces some challenges, we believe its strategic direction of focusing on expanding its residential business will lead to positive growth. Steady customer growth is attractive and should help at least buoy earnings at current levels, if not produce a small amount of EPS growth each year.

Northwest’s share price increase in the past year does not improve its value proposition. With total returns projected to be approximately 9.1% annually, Northwest can be a lucrative investment for conservative, income-oriented investors.