What Could Drive Dominion Energy’s Dividend Growth Going Forward?

Dividend outlook

Dominion Energy (D) is on the final step of completing its acquisition of SCANA Corporation (SCG). The only approval pending is from the South Carolina Public Service Commission. Dominion Energy’s earnings growth could accelerate next year given the contribution from SCANA’s regulated operations and exports from its Cove Point terminal.

Dominion Energy also recently announced that it will acquire its MLP subsidiary, Dominion Energy Midstream (DM). The transaction is expected to be completed by Q1 2019 and is approximately neutral to D’s earnings guidance and credit profile.

What Could Drive Dominion Energy’s Dividend Growth Going Forward?

Dominion Energy is one of the fastest-growing utilities, and it aims to grow its EPS 6%–8% per year through 2020. In comparison, utilities at large are aiming for EPS growth of around 4% for the next few years.

Total returns

Dominion Energy stock has been weak so far this year largely driven by weakness in its MLP subsidiary early this year and uncertainties related to its SCANA acquisition. Dominion Energy is down 4%, while broader utilities are up more than 8% YTD.

Total returns (including dividends) from Dominion Energy in 2018 came in at around -1%, while broader utilities (XLU) returned 11%. In the last five years, Dominion has returned 8% while peers’ returns averaged close to 13% compounded annually.

To learn about top utilities this year and how they are placed for the future, read Which S&P 500 Utility Stocks Have Rallied the Most in 2018?