Stick With Atmos, Kinder Morgan for Yield Says Hennessy Fund Manager

Fear of a Federal Reserve rate hike has created some nervousness around utility stocks.

Fear of a Federal Reserve rate hike has created some nervousness around utility stocks. Nevertheless, Dallas-based natural gas distributor Atmos Energy will continue to grow no matter when Fed Chairwoman Janet Yellen makes her move, said Ryan Kelley, portfolio manager for the Hennessy Gas Utility Fund (GASFX). 'They will continue to see natural gas move through their system and continue to grow at a small pace every year,' said Kelley. Shares of Atmos Energy Corporation (ATO), which yields 2.8%, are up 4% year-to-date. The Hennessy Gas Utility Fund has fallen 12% so far in 2015, according to fund-tracker Morningstar, primarily due to worries about rising interest rates. The $1.6 billion fund has a trailing twelve month yield of 2.6%. The fund also holds Atlanta-based AGL Resources Inc. (GAS), which yields 3.3%. AGL is being bought out by Southern Company (SO) for $66 in cash per share or $8 billion. 'Southern Company is getting a very good company that has performed well for many years,' said Kelley. 'If Southern Company stays in the index we will continue to own that stock as well.' Kelley’s fund also owns shares of Kinder Morgan (KMI), which are down 30% so far this year. The pipeline giant yields a healthy 6.5% because of the downturn in the stock. Some on Wall Street question whether the company can grow or even maintain that yield. Kelley, however, believes Kinder Morgan’s coupon is secure.