ITC Holdings Corp. (ITC) has been making investments into its systems while also completing projects, adding to its EPS growth, which is expected to grow triple the rate of other pure-play utilities, and the company is also looking to increase their dividend in double-digit rates, says Christopher B. Muir, Equity Analyst at S&P Capital IQ.
“The company has really been investing a lot in its transmission system and both in maintenance, investments and in growth projects. They have recently completed a number of projects, which have added to their EPS growth. We see them growing EPS at roughly a 17% three-year compound annual growth rate, and that is triple what other typical pure-play utilities have, but at the same time ITC’s current 2014 p/e ratio is just 15.2 times, so it’s even with electric utilities, and its 2013 p/e ratio is 17.8 times earnings,” Muir said.
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Since ITC is trading at a small premium to the electricity utility space and is also seeing triple EPS growth to other utilities, Muir sees the stock as a strong value play and growth play at the same time. He is also expecting the company to increase its dividend in double-digit rates.
“The company, in addition to growing its EPS, is growing its dividend very quickly. It does have a fairly low dividend yield of just 1.7%. But again, as they increase their dividend in double-digit rates as my expectation, that yield will go up over time for purchased shares. I have a $109 price target on ITC and a five star or ‘strong buy’ opinion,” Muir said.
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