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Expect 10% Annual Dividend Growth From This Utility

Dominion Energy's conservative strategy means future dividend increases are almost locked in for investors.

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Charles Fishman: Earlier this year Dominion Resources changed its name to Dominion Energy, but in our opinion, the market does not appreciate the conservative strategy pivot relying on wide-moat infrastructure investments that we expect to provide 10% per year dividend increases over the next five years. Dominion's attractive dividend currently provides a 4% yield, but we believe the company's conservative strategy means future dividend increases are almost locked in for investors.

The company exited oil and gas exploration and production in 2010 and is now less dependent on merchant generation, two businesses where earning a moat is difficult. Dominion's wide-moat growth projects--notably the Cove Point Liquefied Natural Gas facility and the Atlantic Coast Pipeline--illustrate the new conservative strategy and should be in commercial operation later this year and late 2019, respectively.

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Charles Fishman does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.