Dominion Energy Stock Analysis & Dividend Review

A Dividend Reduction Is Always Disappointing

Dominion stock once was my favorite dividend stock holdings. Because for many years it provided a great combination.

A combination of current dividend income and dividend growth. I used the cash to partially fund my living expenses.

But with a dividend reduction now in the history books. Dominion stock fell from my list of favorites.

So let’s put the Dominion Energy stock dividend under the microscope. And work through a Dominion stock analysis.

Is Dominion Energy stock a good investment? We will answer this important question. And many more about its dividend.

A model dividend stock portfolio holding here at Dividends Diversify. Let’s start with key takeaways…

Dominion stock analysis

Disclosure: At no cost to you, I may get commissions for purchases made through links in this post.

Dominion Stock & Dividend Review: Key Takeaways

Here are a few takeaway points from this analysis of Dominion stock and the Dominion dividend:

  • A very disappointing dividend reduction in 2021
  • New dividend yield near my 3%-5% target range
  • 6% projected longer-term dividend growth off of the new base
  • Targeting a safer dividend payout ratio going forward
  • Not the powerful combination of high dividend yield and high dividend growth it used to be
  • Potential for 8-10% long term total returns

For my account, I have a hold call on the shares. More on my reasons for that in the wrap-up section.

This puts me on the hunt for new dividend stocks to invest in. And I have a couple of “go to” sources.

First, there is the Simply Investing report. It focuses on both U.S.-based and Canadian-based companies that pay regular dividends.

Simply Investing’s interactive data base is simply awesome. For all of the latest dividend metrics. And a strong opinion on valuation.

I also like the Motley Fool Stock Advisor. For its insightful stock reviews. And stock recommendations delivered to my in box every month.

With those highlights and thoughts taken care of. Let’s get into the details. Starting with some background on the company.

Dominion Energy: Company Background

Dominion Energy is one of the largest producers of energy in the United States utility sector.  Headquartered in Richmond, Virginia, they have millions of customers. Across more than a dozen states.

There operating assets are focused on:

  • Electric generation, transmission, and distribution
  • Renewable energy generation

Dominion’s operations are centered around the following areas…

First, a Power Delivery Group. That distributes electricity to North Carolina and Virginia.

Second, the Power Generation unit. It manages the company’s fleet of power generating stations.

Power sources include renewables such as water, wind, and solar.  Also, more traditional power sources like nuclear, gas, coal, and oil.

Business Risks That Could Have An Impact On The Dominion Dividend

First of all, regulatory relations have traditionally been positive for Dominion.  But the political winds can always shift and limit pass-through of costs plus a fair profit on growth projects.

Furthermore, Dominion periodically makes acquisitions of other companies. Their ability to successfully integrate. And realize merger savings. Is also a business risk.

Dominion Stock Symbol

Dominion Energy stock trades on the New York Stock Exchange (NYSE). It trades under the ticker symbol D (NYSE: D).

When I buy (and hopefully never sell) my dividend stocks. I use the Webull app. It’s fast and powerful. And has great research tools.

And best of all trades are commission-free. You can learn more about Webull here.

But, moving right along with our feature company. That completes the business overview portion of today’s Dominion stock analysis.

Next up, dividends…

Facts & Figures Regarding the Dominion Stock Dividend

First of all, let’s talk about how to make money with dividends from a stock like Dominion. And understand everything we need to know about the Dominion dividend…

Dominion’s Dividend Rate Per Share

The annual forward dividend is the last cash dividend payment approved by the company. Multiplied by the number of times when a company pays dividends each year.

By taking the annual forward dividend. And dividing it by the stock price, we get the dividend yield…

What Is The Dominion Stock Dividend Yield?

Based on the recent stock price. The current dividend rate per share puts the Dominion stock dividend yield in or around my target dividend range of 3-5%.

I use this range to screen for new dividend stock purchases. Or, additions investments to my current holdings.

On the other hand, Dominion’s dividend yield is fairly low. When compared to other regulated utility stocks.

There are other dividend stocks with higher combined yields. And dividend growth prospects.

How Often Does Dominion Energy Pay Dividends?

Dominion pays its dividend every 3 months or 4 times per year. Each quarterly dividend payment is one-fourth of the annual rate.

When Does Dominion Pay Dividends?

What is the timing of the dividend payments from Dominion?

Well, they are paid on or around the 20th day in the following months: March, June, September, and December.

When Is The Ex-Dividend Date For Dominion Stock?

For an investor to receive Dominion’s next dividend payment. One must complete their purchase of Dominion stock before the ex-dividend date.

Dominion Energy’s ex-dividend date is approximately 2-3 weeks before each quarterly dividend payment.

Mind Your Dividend Dates

If the exact timing of dividend payments is important to you. Understand that each quarter they are slightly different.

So, it’s a good idea to see Dominion’s dividend payment history and timing of payments on its investor relations website.

Otherwise, buy and hold for the long term. Then you will receive every dividend that is approved and declared by the board of directors.

Hopefully, you aren’t starved for the cash. And need not worry about the exact dates.

Dominion Stock Dividend Growth And History

Dominion has a good trend of dividend increases going for a number of years.

Since they had increased the Dominion dividend for 17 consecutive years.

But dividend growth slowed.

And not long after, management announced the dividend would be reduced in 2021.

I was disappointed with the slowing dividend growth. Even more so, the dividend reduction.

This leads me to why I liked Dominion stock so much in the decade of the 2010s.

Related: Duke Energy dividend review

Dominion Stock: A Great Investment In The 2010 Decade

Hopefully, you are starting to see why Dominion Energy WAS one of my favorite dividend stocks. Specifically,

  • Dividend yield in the 5% range
  • 8-9% annual dividend growth
  • 17 consecutive years of dividend increases
  • A double in value of the Dominion share price

Dominion was a dividend stock investors dream! But the company’s fortunes changed.

Illustrating why dividend stock and dividend portfolio monitoring is critical.

Fortunately the Simply Investing Report and Analysis Platform can keep you up to date. With all of your stocks metrics. And an overvalued or undervalued signal to guide your investments.

Let’s move on to some of the business fundamentals next.

Dominion Energy Historical Revenue Trend

The company’s revenue typically holds in pretty tight range.  This is normal for a regulated utility stock.

Major changes are usually due to merger and acquisition activity.

For example, the acquisition of SCANA. And the divestiture of the natural gas business to Berkshire Hathaway Energy.

What do earnings look like? Let’s see…

Dominion Stock Dividend Payout Ratio & Earnings Per Share

Earnings per share grow over the long run as Dominion invests in capital improvement projects.   The cost of these projects plus a profit margin is then passed on to their customers.  This is the essence of a regulated utility business model.

But, trouble can arise when dividends grow faster than earnings. And the dividend payout ratio becomes too high. In a worst case the company ends up paying more in dividends than it earns.

Thus, a lower dividend payout ratio is usually better for the investor.  It allows the company to maintain dividends during difficult times.  Or increase it even when earnings are not growing.

Regulated utilities typically have higher dividend payout ratios. But Dominion’s was clearly getting too high for management to handle. Leading to a reduction.

Fortunately, the new and lower dividend provides for a more sustainable dividend payout ratio moving forward.

Finally, there is always potential for dividend reductions in a dividend stock portfolio. It is one of the negatives of dividend-paying stocks.

Next, let’s look to the future. Here’s what the company projects for dividend growth and the dividend payout ratio…

Dominion Dividend Policy, Dividend Growth Forecast & Payout Ratio

Dominion management went on record after the dividend reduction to state:

The company now expects to target an approximately 65 percent payout ratio…

The … annual dividend reflects the absence of income from the divested natural gas assets and a revision to the company’s target payout ratio to align with best-in-class utility industry peers.

Beginning in 2022, the company expects annual dividend-per-share increases of approximately 6 percent per year. This represents a significant increase from the previous long-term dividend per-share growth guidance of 2.5 percent.

Wrapped up in that comment is a clear-cut dividend growth policy statement.

The statements indicate a long-term Dominion stock dividend growth forecast of 6.0%. And a 65% target dividend payout ratio.

This is all very good information. When it comes to understanding the future issuance of dividend payments from Dominion.

But it is important to keep in mind that paying dividends is not a requirement. Furthermore, this dividend policy, as communicated to my management. Can be changed at any time.

However, I do like it. As a good example of communicating dividend policy.

Let’s see what the company’s financial position looks like next…

Dominion Energy Credit Rating & Balance Sheet

Moody’s and S&P typically rate Dominion long-term as investment-grade.

Table 2: Credit Rating Evaluation Grid

Dominion dividend review: credit rating evaluation grid

Also, Dominion’s debt to equity ratio compares favorably to other utility stocks.

Dominion is like other utility companies. They are very capital intensive and need both debt and equity financing to support their businesses and grow.

Dominion’s balance sheet, financial position, and credit ratings are acceptable to me. They are in line with other regulated utilities.

On a side note, be sure to keep an eye on your personal credit score. I check mine for free using Credit Karma. You can learn more about Credit Karma here.

Furthermore, investing in dividend stocks is just one aspect of solid money management. It’s also a good idea to treat your entire financial picture as a business.

To do so, I manage all of my investments and spending in one place. By using web-based Personal Capital.

You can learn more about Personal Capital here. It’s easy to sign up. And free to use.

Dominion Dividend Safety

Taking into account Dominion’s dividend metrics, business fundamentals, and financial position, I judge Dominion’s new dividend rate to be safe.

When I say safe, I mean it is unlikely to be reduced in the foreseeable future. I doubt they will need to reduce it again anytime soon.

I will assume they can achieve their dividend payout ratio goal. Because that is a very comfortable level for a regulated utility.

Next, a check on the stock’s valuation. Then I will wrap this up.

Dominion Stock Valuation

Let’s look at Dominion stock value using a dividend discount model.

Dominion Dividend Discount Model

I like the single-stage dividend discount model to calculate a fair value for the Dominion stock price.  And other stocks I own.

The model considers some of the points discussed thus far.  Specifically,

And one additional fact. My desired annual return on investment.

Using these assumptions, the Dominion dividend discount model suggests the stock is undervalued (as of the time of this update).

Note that valuation metrics can change rapidly. Due either to fluctuations in the stock price. Or changes in business fundamentals.

So, get the current valuation call from Simply Investing.

Dominion Energy Stock Return Forecast

Here’s some basic stock forecasting logic. I sometimes like to apply it to the stocks I own.

With the premise being, when all other things are equal (which they rarely are) a stock will rise along with the growth in earnings.

So, with 6% projected earnings growth, I could see increasing by a like amount each of the next 5 years.

Couple that share price appreciation with a the dividend yield and an investor has potential for an 8-10% total return.

Of course, nothing is guaranteed. Do your research and invest at your own risk. Since stocks rarely rise linearly. Even if earnings do.

Dominion Stock & Dividend Analysis Wrap Up

Dominion stock is one of the largest stock holdings I own.  Because it was one of the first purchases when I got serious about my stock portfolio for recurring dividends nearly 20 years ago.

It has been a rewarding dividend growth stock investment. But dividend reductions are always disappointing.

Because of its size in my portfolio, I won’t be adding to my shares at this time. And because of the unrealized capital gains, I’m sitting on. I will not be selling either.

So, for my account. I have a hold call on Dominion stock.

Further Reading About Dividend Stocks Like Dominion

My Favorite Dividend Investing Resources

The dividend investing and personal finance resources I mentioned in this article are summarized here for your convenience.

I use all of them. To make the most of my money and investments.

Trade stocks for free using the Webull app
Get dividend stock recommendations from Simply Investing
Use Morningstar for insightful investment analysis
Or, try the Motley Fool Stock Advisor
Check your credit for free using Credit Karma
Manage your total financial picture for free using Personal Capital

Disclosure & Disclaimer: I am not a licensed investment adviser, financial adviser, or tax professional. And I am not providing you with individual investment advice, financial guidance, or tax counsel. Furthermore, this website’s only purpose is information & entertainment. And we are not liable for any losses suffered by any party because of information published on this blog.

I own Dominion stock and collect the Dominion dividend.

4 thoughts on “Dominion Energy Stock Analysis & Dividend Review”

  1. Wow, almost 5% yield for a utility company in the US that’s like Canadian dividend stock pricing, lol!

    Great write up, I have heard of Dominion, love utilities.

  2. Hi Tom,

    I’m pretty sure I own Dominion and plan to hold for the long term. I’ll add to the position if the P/E ratio comes down.

    Cheers,
    Miguel

    • Hi Miguel. Utility stocks that pay solid dividends like Dominion can be a great part of any investment portfolio. Tom

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