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Factors that Could Drive Dominion Energy’s Dividend Growth

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What is the dividend outlook for Dominion Energy?

Dominion Energy’s (D) present dividend yield of 4.4% is due to its dividend growth and price loss, which explains the rising dividend yield. Its dividend grew 8.0% in both 2016 and 2017, and its dividend is projected to grow 10.0% in 2018.

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What is the projected dividend payout?

Dominion Energy (D) had respective dividend payouts of 74.0% and 84.0% in 2016 and 2017. It has a projected dividend payout of 82.0% in 2018. The company has been unable to generate positive free cash flow balance due to high capital expenditures relative to its operating cash flow.

What drove the operating revenue growth?

Dominion Energy’s (D) operating revenues recorded flat growth in 2016 and grew 7.0% in 2017. Gas sales, gas transportation, and storage drove the growth in 2017, which was offset by electric sales.

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What drove Dominion Energy’s EPS growth?

Dominion Energy’s (D) cost of revenues fell 20.0% in 2016 before rising 4.0% in 2017. This trend was due to lower costs associated with electric fuel and other energy-related purchases, purchased electric capacity, and purchased gas in 2016. This rise in 2017 was due to higher purchased gas, although it was offset by the other factors. As a result, its gross profit expanded 10.0% and 8.0% in 2016 and 2017, respectively.

Dominion Energy’s operating expenses rose 15.0% and 4.0% in 2016 and 2017, respectively. This trend led to 3.0% and 14.0% growth in operating income for 2016 and 2017, respectively.

Other net expenses rose 7.0% and 37.0% in 2016 and 2017, respectively. The rise was due to higher interest expenses. These factors translated into 15.0% growth in its 2016 net income before a 2.0% fall in 2017. Its EPS (earnings per share) grew 10.0% in 2016 before shedding 5.0% in 2017.

Future operating revenue and EPS drivers for Dominion Energy

The 1,588-megawatt Greensville County combined cycle power station is expected to commence operations by the end of 2018. The Cove Point Liquefaction facility is also complete. Growth in regulated gas and electric businesses, the addition of Dominion Energy Questar, and lower operating expenses are expected to drive the company’s earnings.

Dominion Energy’s (D) operating revenues are projected to grow 10.0% in 2018. Its earnings per share are expected to grow 13.0% in 2018.

Dominion Energy’s PE (price-to-earnings) ratio is 22.4x, and its dividend yield is 4.4%. In comparison, the sector’s average PE ratio is 58.6x, and its dividend yield is 3.7%.

Dividend ETFs with exposure to Dominion Energy

The iShares Select Dividend ETF (DVY) has a PE ratio of 20.3x and a dividend yield of 3.0%. The iShares Core High Dividend ETF (HDV) has a PE ratio of 21.0x and a dividend yield of 3.4%.

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