2 Stocks We're Less Excited About

In early August, Morningstar's equity analysts updated their list of high-conviction picks. Two of the stocks cut from the list were Comcast and Dominion Energy.

We have removed Comcast from our list of high-conviction ideas because its share price is now near our fair value estimate. We continue to view the stock as a solid core holding that will create wealth for shareholders over time, thanks to the firm's wide-moat core cable business and the moves it is making to build a strong media operation. At the current share price, though, we think there are better ideas for new investment.

We removed wide-moat Dominion Energy from our high-conviction list for the same reason--its price approached our fair value estimate. Although annual dividend increases averaged 9% the past five years, management raised the dividend only 2.5% in the first quarter of 2020 and now plans to cut the dividend by 33% in the fourth quarter. The new annual dividend represents a payout ratio of approximately 65% based on our 2021 earnings estimate, and we believe it is now secure. We believe Dominion's dividend yield and earnings-growth outlook could deliver high-single-digit returns through this decade and beyond.