What I love about utilities? I’ll start by saying income, income, and more income. If you fit the profile as a frugal or do it yourself investor type you truly look for undervalued securities that may offer consistent dividend payouts, high-yields, and earnings per share growth. Being able to find utilities currently trading at below value premiums is not so commonplace in this seven year bull market. To say this unprecedented run is coming to a halt sounds typical and an easy talking point for most investors knowledgeable about historical market trends. However, I have discovered a potential utility company that offers consistent dividend payouts, attractive dividend yields, and modest growth potential in the years to follow. Let’s take a look at what I’ve uncovered and would like to share with all of my “DIY” investor friends.
The most favorable utility company of my choice is Dominion Resources Inc. (D), a power and energy company with headquarters in Richmond, Virginia and currently supplies electricity in parts of Virginia and North Carolina. Also, Dominion, supplies natural gas to sectors of West Virginia, Ohio, Pennsylvania, and eastern North Carolina. Presently, shares are trading around $71.00 with a dividend yield of 3.79% and earnings per share price of $3.20. Recently, the company completed an acquisition of Questar (STR) for $4 billion in cash, unfortunately Dominion assumed $1.5 billion in debt with this purchase. However, to offset the negative assumption of debt the deal received all regulatory approval and strategically aligns with the current MLP strategy for Dominion. As a result of the acquisition Edward Jones analyst Andy Pusateri, CFA, expects an annual dividend growth of 8% and earnings per share growth of 6% through 2017. The expectations for this dividend and earnings per share growth will be driven by joint ventures in Blue Racer JV and Cove Point LNG. Blue Racer JV will funnel income to Dominion from their midstream services provided to Utica Shale producers and Cove Point LNG income will be driven through its liquefied natural gas facility.
I suggest Dominion Resources as a value buy based on the acquisition of Questar (STR) and the two joint-ventures with Blue Racer JV and Cove Point LNG. Both the acquisition and joint ventures will add solid revenue streams to funnel future dividend and earnings per share growth.
Let’s invest, let’s invest2day!