Gas for home use has helped Piedmont's results. Image: Piedmont.

The utility industry used to be a sleepy backwater, primarily attracting only those investors who wanted low-risk, conservative investment plays. Huge changes in the industry have made many utility companies far riskier than they used to be, though, with exposure to commodity prices and other external factors jeopardizing results. Yet Piedmont Natural Gas (NYSE:PNY) has largely stayed close to its pure-utility roots, and that has been a good strategy to sustain 37 straight years of dividend increases.

Coming into its fiscal second-quarter report, Piedmont investors weren't certain whether the utility would be able to sustain its growth. But the company came through with solid numbers once again. Let's take a closer look at Piedmont Natural Gas and how it performed during the quarter.

Piedmont gasses up
The results for Piedmont Natural Gas during its fiscal second quarter were mixed. Operating revenues fell markedly, with an 8% drop to $424.9 million. Yet because Piedmont's revenue comes from selling natural gas, revenue fluctuates from quarter to quarter based on prevailing natural gas prices. As a result, declines in the cost that Piedmont paid for gas offset those revenue losses, and the utility's net income climbed 6% to $66.4 million, working out to earnings of $0.84 per share. That was a nickel more than most of those following the stock had expected, and 5% higher than last year's figures.

Looking more closely at Piedmont's results, the extent of the drop in gas prices provided most of the boost to the company's bottom line. Cost of gas fell 21% to $199.3 million, leaving Piedmont with a 7% better gross profit than it had during the year-ago quarter. Piedmont attributed the increase to rate adjustments in Tennessee and North Carolina, as well as growth in the number of customers throughout its coverage area. Piedmont also saw higher delivery volume, with the company delivering more than 125 million dekatherms, more than a fifth higher than last year. Overall, Piedmont did a good job of keeping its expenses under control, with just a 2% rise in operations and maintenance expenses helping to boost operating income by 12%.

One potential cause for concern came from the amount that Piedmont spent on interest during the quarter. By itself, the $18.1 million interest charge doesn't seem all that important, but the figure was up 50% from year-ago levels. Piedmont attributed the rise to higher amounts of debt and higher balances due to customers, as well as a drop in how much the company spent on construction expenditures, some of which it could usually offset against interest charges.

What's ahead for Piedmont?
Looking forward, Piedmont doesn't expect any huge changes compared to where it saw itself moving in the past. The company reiterated its previous earnings guidance for the full 2015 fiscal year, predicting earnings of between $1.82 and $1.92 per share. With the consensus figure right in the middle of that range at $1.86 per share, the news didn't bring any big surprise to Piedmont investors.

Dividend investors were also pleased to see the company sustain its increased dividend from last quarter, with the utility paying out $0.33 per share this quarter. Yet despite Piedmont's impressive track record of dividend growth, it's important to notice that for a full decade, Piedmont has only made single-penny quarterly increases to its payout, and as the dividend amount rises, the percentage increase that the $0.01 per share rise represents becomes steadily less substantial.

Still, one wildcard for Piedmont is its Constitution Pipeline joint venture. The deal helped push overall pre-tax income from joint ventures up by more than 10% during the quarter, and is playing an important role in bringing natural gas into North Carolina. If that trend continues, it could lead to greater consumption and help allow further growth in natural gas use in the heart of Piedmont's territory.

Piedmont investors didn't react strongly to the report, with shares hardly moving after the announcement and before the company's conference call Monday morning. For the most part, Piedmont has moved in line with interest rate trends, and given its 3.6% dividend yield and slow-growth prospects at least in the immediate future, Piedmont's future course will likely depend on rate movements rather than fundamental growth.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.