Dominion Energy (D), the third-largest utility stock by market cap, offers a yield of 5.2%, significantly higher than peers. Its long dividend payment history is indeed attractive compared to other top utilities. It has paid a dividend for the last 365 consecutive quarters. Apart from the premium yield, Dominion Energy’s dividend growth is also higher than many peers.
In the last five years, Dominion Energy’s dividends grew more than 8% compounded annually. Broader utilities (XLU) managed to increase their per share dividends by an average ~4% compounded annually.
Dominion Energy’s superior dividend growth is stimulated by its above-average earnings growth. It generates a large portion of its total income from regulated operations. Thus, the company has relative earnings stability, which eventually bodes well for stable dividends. Peer NextEra Energy (NEE) managed to increase its dividends by more than 10% in the last five years, the highest among peers.
Over the past 12 months, Dominion Energy stock has returned 20%, underperforming broader utilities. Dominion Energy’s superior yield and higher dividend growth make it an attractive name among top utilities. Its faster earnings growth is expected to persist for the next few years, which likely implies higher dividend growth as well. Analysts anticipate its dividends to grow ~8% annually for the next few years. This expected dividend increase seems much better than peers’ average of ~4% for the next few years.