Morgan Stanley rebalances its view of utilities and cuts Atmos Energy (ATO) to equal weight

Atmos Energy Corporation (NYSE:ATO) is one of the 14 Best Dividend Growth Stocks to Buy and Hold in 2026.

On Dec. 16, Morgan Stanley lowered Atmos Energy Corporation’s (NYSE: ATO) rating from overweight to equal weight and lowered its price target from $182 to $172 as part of its 2026 utility outlook. The firm said utility stocks’ performance in 2026 will be shaped by data center demand and pockets of growth, without “a slowdown in activity or relief from the narrowness of the network. Against this backdrop, Morgan Stanley urged investors to avoid political and regulatory risks, particularly in an active election year.

Atmos Energy currently offers a forward dividend yield of approximately 2.3%. At first glance, this seems modest. Over time, growth tells a different story. The company’s quarterly dividend has grown at an annualized rate of more than 8% over the past decade. This trend appears sustainable as management expects earnings growth of 6-8% in the coming years and the company operates under a fully regulated model. This structure supports steady expansion while limiting exposure to fluctuations seen in unregulated utility markets.

Headquartered in Dallas, Atmos Energy Corporation (NYSE: ATO) distributes natural gas to customers throughout the United States. Utilities often set long records for dividend growth, and Atmos has followed this path consistently.

While we recognize ATO’s potential as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for a hugely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the reshoring trend, check out our free report on the best AI stock in the short term.

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