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How Dominion Energy Stock Is Placed in 2019

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Jan. 17 2019, Updated 9:00 a.m. ET

Dominion Energy

Dominion Energy (D) stock offers an upside potential of more than 11% based on analysts’ median target price of $75.8 for the next 12 months. It’s currently trading at $67.9.

Analysts seem cautious about Dominion Energy stock. Of the 15 analysts tracking Dominion Energy, two have given it “strong buys,” four have given it “buys,” eight have given it “holds,” and one has given it a “sell.”

Dominion Energy stock underperformed its peers last year mainly due to uncertainties regarding its acquisition of SCANA (SCG) and issues with its MLP subsidiary, Dominion Midstream Partners (DM). It completed its SCANA merger early this month. Uncertainties related to permits for the Atlantic Coast Pipeline also weighed on Dominion Energy stock last year.

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Valuation

Dominion Energy stock currently looks attractively valued. It’s trading at a forward PE of 16x against its five-year historical average PE of 23x. Utilities’ (XLU) average PE for the next 12 months is close to 17x. Dominion Energy looks to be trading at a fairly discounted valuation compared to its historical average.

Dominion Energy is currently trading at a dividend yield of 4.8%, higher than the industry average of 3.3%. Top utilities Duke Energy (DUK) and NextEra Energy (NEE) have yields of ~4.4% and 2.5%, respectively. In the last five years, Dominion Energy’s dividend has increased by 8.2% compounded annually. Its above-average dividend growth has been driven by above-average earnings growth. Dominion Energy’s premium yield and superior dividend growth, along with its upside potential, form an impressive total return proposition.

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