We have upgraded our recommendation for NiSource (NI) to Outperform, as we believe the recent equity issue removes a key apprehension on the stock. The issue makes way for the company to reach its $1 billion investment target while comfortably meeting its long-term 3%-5% EPS growth target.
NiSource’s strategy of divesting its non-core businesses and transforming into a pure-play regulated company bodes well in our view. The company has improved its balance sheet and maintained its investment grade credit ratings in the past year.
We believe income-seeking investors will find the company’s current dividend yield of 5.4% attractive. Our target price of $20.00 is based on the 2011 P/E multiple of 15.5x.