Dominion Up on 7.9% Dividend Hike, Rise in Payouts – Analyst Blog


On Feb 9, Dominion Resources, Inc. (D) increased its quarterly cash dividend to 64.75 cents per share from 60 cents paid in fourth-quarter 2014. This translates to a yearly dividend of $2.59 per share, an increase of 7.9% from $2.40 disbursed in 2014.

Investors reacted positively to the news with Dominion's share price increasing 1.9% in the last trading session.

The increased dividend will be paid on Mar 20, 2015, to shareholders of record as of Feb 27, 2015. The utility has consistently shared increased profits with its shareholders and has a history of boosting dividends every year.

Richmond, VA-based Dominion has a current dividend yield of 3.38%, higher than the industry average of 2.16%. Last year, the company achieved a payout ratio of 69.97% and targets to increase this ratio to 70–75% in the 2015 through 2020 time frame. In 2012, the company had set a payout target of 65–70%.

Management pointed out that the company’s aim of realizing operating earnings per share growth of 6–7% in the next five years is a precursor to achieving the payout ratio.

Together with its well-placed regulated assets and merchant generation business, the company is leveraging its renewable assets to drive earnings growth. Last quarter, Dominion made three acquisitions to enhance its renewable generation portfolio.

We believe revenues from diversified assets will bring about growth in the company’s bottom line and lead to consistent or increased dividend payments for shareholders.

Latest Earnings Recap

Dominion Resources reported fourth-quarter 2014 operating earnings of 84 cents per share, lagging the Zacks Consensus Estimate by a penny or 1.2%. Earnings were ahead of the year-ago figure of 80 cents by 5% and were within the guidance range of 80 cents to 90 cents for the quarter.

2014 operating earnings were $3.43 per share, up 5.5% from 2013 earnings of $3.25 per share. The year-over-year improvement was due to higher contribution from its regulated gas and electric businesses, earnings from Marcellus farmouts, higher merchant generation margins, and benefits from investment tax credits.

Zacks Rank

Dominion currently carries a Zacks Rank #3 (Hold). Stocks with a superior rank in the electric utility space include Abengoa Yield plc (ABY), Enersis S.A. (ENI) and Huaneng Power International, Inc. (HNP). All three stocks currently sport a Zacks Rank #1 (Strong Buy).

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