Dominion Energy
D
announced that its board of directors has approved a 6% increase in the annual dividend rate to $2.67 per share, up from the previous figure of $2.52. Subject to the declaration of a new quarterly dividend of 66.75 cents in January, the first quarterly dividend will be payable in March 2022.
The dividend rate increase is in sync with Dominion’s target to hike dividend annually by 6% through 2025. Dominion’s target payout ratio is 65% of net income. The new annualized dividend reflects a
dividend yield
of 3.41%, which is better than the
industry
average of 3.29%, and Zacks S&P 500 composite’s 1.36%.
Can Dominion Continue Dividend Hikes?
Past performance of companies does not necessarily ensure the payment of future dividend. Yet, Dominion’s dividend payment history indicates that the company has been performing steadily and generating enough cash flow to distribute dividends to shareholders.
Dominion Energy will continue to make systematic investments to strengthen its electric and natural gas infrastructure. Dominion Energy plans to invest $32 billion in the 2021-2025 time period to strengthen its existing infrastructure, out of which a major portion will be invested in zero-carbon generation and energy storage. Over the next 15 years, Dominion aims to invest $72 billion to strengthen its infrastructure and add more clean power generation assets to its portfolio. These investments will allow Dominion to generate strong cash flows.
In May 2021, Dominion acquired 100% ownership interest in Birdseye from BRE Holdings, LLC. Birdseye is primarily engaged in the development of solar energy projects in southeastern states in the United States, where 2.5 GW of solar generation projects are under development. Inorganic assets are also expected to contribute to Dominion’s future earnings.
The divestment of its gas transmission and storage assets to an affiliate of Berkshire has supported Dominion’s transition toward regulated and sustainable operations. Currently, up to 88% of operating earnings are generated from the portfolio of regulated electric and natural gas utility companies. The majority of income generated from regulated operations provides clear visibility of future earnings and gives management ample opportunities to carry out shareholder-friendly moves.
Utilities’ Legacy of Dividend Payment
The companies that are involved in utility services generally have stable operations and earnings. Consistent performance and the ability to generate cash flows allow utilities to reward shareholders with regular dividends. Dominion has been paying dividend regularly for the past 32 years.
Dominion is not the only one in the utility space that has a long dividend payment history. There are quite a few utilities having a track record of more than 100 years of consistent dividend payment.
Utilities like
National Fuel Gas
NFG
,
Consolidated Edison, Inc.
ED
and
Edison International
EIX
, among others, have also been rewarding shareholders with dividend payments for more than a century without fail.
The current dividend yield of National Fuel Gas, Consolidated Edison, and Edison International is 2.91%, 3.73%, and 3.99%, respectively, better than the Zacks S&P 500 composite’s yield of 1.36%.
The long-term (three to five years) earnings growth of Consolidated Edison and Edison International is pegged at 2% and 4.1%, respectively. The Zacks Consensus Estimate for fiscal 2022 earnings for National Fuel Gas has moved up 10.2% in the past 60 days.
Price Performance
Shares of the Dominion have outperformed the industry in the past three months.
Image Source: Zacks Investment Research
Zacks Rank
Dominion currently has a Zacks Rank #2 (Buy). You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
.
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