Dominion Energy’s D board of directors announced a 2.5% hike in the quarterly dividend to 94 cents per share from the previous rate of 91.75 cents. The new quarterly dividend will be paid out in March 2020, subject to declaration by its board of directors.
The current annual dividend yield of the company is 4.6% compared with the industry’s 2.9%.
History of Dividend Hike
Dominion’s strong operations allow it to generate stable cash flow, which enables the company to fund capital expenditures and pay dividend to its shareholders. The 2020 dividend increase would mark the 17th consecutive year of hike in annual dividend rate by Dominion.
Is This Annual Dividend Hike Sustainable?
Dominion plans to invest $26 billion in the 2019-2023 time period to strengthen its existing infrastructure. Secured earnings from more than 95% regulated assets will continue to drive Dominion’s bottom-line growth.
Strong utility fundamentals in its service territories and increase in customer volumes are likely to drive demand and performance of the company. Planned investment in different segments and positive returns from the completed capital projects are expected to drive Dominion’s earnings growth at a rate of 5% per year through 2020 and 5% plus thereafter.
The above factors will support the company to deliver steady financial performance over the long term and allow management to carry out shareholder-friendly moves.
Transition in Energy Space
Due to their nature of operation, utility companies generally deliver stable earnings performance that enables them to pay regular dividend to its shareholders. Stable earnings allow utilities to reward its shareholders, generate funds needed to add more clean sources to their generation portfolio and gradually move away from coal to produce electricity.
Dominion, given regular investment, aims at cutting carbon emissions in its power generation by 55% in 2030 and further by 80% in 2050 from 2005 levels. In addition, utilities like Duke Energy Corporation DUK, Xcel Energy XEL and NextEra Energy NEE are investing considerably to lower carbon emissions, and add more renewable and clean sources to their generation portfolio.
In the past six months, shares of Dominion have gained 5.8% compared with its industry's 4.8% growth.
Dominion currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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