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Dominion Energy Analysis | Utility Sector Stocks | Stock Analysis | Who Beat The S&P 500 Ep. 9 - YouTube
Channel: Stock Ninja
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What was once a largest electric company
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in the United States, and is it still a
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good bet for future returns and
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stability? Stick around to find out. Hey
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everyone Stock Ninja here. Welcome back!
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Before we get started today I wanted to
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give a huge shout out to Rich over at
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the Richuation room. Last week I had the
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privilege to be on his podcast and it
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was a blast.
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Rich runs an excellent podcast where he
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interviews fellow investors on their
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financial journeys. We had a great
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conversation about stocks, investing
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strategies, YouTube and all aspects in
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between. I have linked his channel in the
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description below and if you would like
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to learn more about my personal
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investing journey I have also linked to
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that episode in the podcast as well. So
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once again thank you Rich. Now on to
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today's episode of Who Beat the S&P 500?
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Today we will be looking into the
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Utility Sector. Definitely one of the
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more defensive industries the utility
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sector is in charge of providing energy,
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water, and essentials to the general
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public.
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Founded in 1983 today's company Dominion
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Energy was once at the top of the
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utility sectors list of companies in
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terms of market cap. Let's see what kind
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of returns a huge utility company like
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Dominion would have given you over the
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last twenty years. Had you invested
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$10,000 into Dominion exactly 20 years
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ago with dividends reinvested, you would
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be sitting on a grand total of eighty
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one thousand four hundred twenty two
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dollars and sixty eight cents versus a
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twenty nine thousand five hundred twenty
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four dollars and thirty eight cents of
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the S&P in the same time frame that is
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an excellent seven hundred fourteen
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point zero nine percent total return
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over three and a half times that of the
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SPS one hundred ninety five point four
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two percent at a solid average annual
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return of eleven point zero five percent
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versus the five point five six percent
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of the S&P in the same
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time frame just a quick reminder don't
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forget to hit the like button and
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subscribe to the channel if you want to
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see more content like this with the
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market cap of around 69 billion dollars
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Dominion energy trades with the ticker
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symbol of D listed in the utility sector
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Dominion is currently a member of the
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S&P 500 index on the new york stock
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exchange with the quarterly dividend
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distribution Dominion just recently
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announced a 360 ninth consecutive
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dividend or over 92 year straight of
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dividend payments but wait a sec 92
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years didn't I say that Dominion was
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founded in 1983 so turns out these
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consecutive dividends includes both the
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current Dominion and their previous
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parent company Virginia Electric Power
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Company otherwise known as vep Co which
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was founded in 1909 but rebranded in
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1925 Dominion currently has a dividend
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yield of 4.5 5% which equates to a three
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dollar seventy six annual payout with a
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current payout ratio of eighty six point
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three six percent the payout ratio at
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first glance is very high but this is
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the case across the utility sector as a
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whole with the majority of the payout
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ratios being higher than seventy percent
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with 16 years of consecutive dividend
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growth Dominion has grown their dividend
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at a seven point six nine percent
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ten-year kegger or compound annual
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growth rate and show signs of increasing
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with an eight point eight seven percent
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five-year kegger and a nine point four
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fourth percent three-year kegger with
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the relatively high dividend yield and
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predictability in the utility sector
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Dominion is an excellent stock to own in
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any dividend portfolio purely from a
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dividend perspective with over ninety
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two years of dividend payment across
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both its parent company and the current
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Dominion Dominion will provide
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consistency and reliable payments
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recorded utility companies are highly
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regulated at both the national level and
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the state level there are some cases
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where even local municipalities impose
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some sort of regulation also something
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that a lot of people might not be
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familiar with is that utility companies
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actually don't generate any revenue on
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the products they sell all the products
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they sell are sold at cost to the
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customer so if you use a hundred dollars
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in electricity this month that's
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exactly how much the utility company
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will charge you so how does Dominion
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actually make money
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utility companies generate income
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through their investments in assets that
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are used to provide their services the
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more infrastructure that a utility
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builds the higher the profits it can
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generate with that being said let's take
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a closer look and check out the minions
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revenue segments with the fiscal year
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running from January to December each
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year Dominion generated sixteen point
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four three billion dollars in fiscal
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year 2019 up over 22 percent
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year-over-year and growing around nine
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point five percent annually the last
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four years a recent change in dominions
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operating and reporting structure has
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their revenues separated into five
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reportable segments Dominion energy
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Virginia gas transmission and storage
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gas distribution Dominion energy South
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Carolina and contracted generations
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starting with a smallest segment by
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overall revenue at 7 percent the
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contracted generation segment operates
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more than 50 solar arrays under
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long-term contracts with utilities large
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customers and Millstone power stations
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in Waterford Connecticut generating 11
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percent of overall revenue the Dominion
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energy South Carolina segment serves
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seven hundred forty four thousand
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electric customer accounts and 392,000
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natural gas customer accounts the gas
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distribution segment which accounts for
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12% of overall revenue operates for
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local natural gas distribution companies
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serving Ohio Utah North Carolina West
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Virginia Wyoming and Idaho with over
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eighty eight thousand seven hundred
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miles of pipelines and serving three
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million customer accounts the gas
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transmissions and storage segment is a
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second largest segment generating twenty
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four percent of overall revenue this
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segment operates one of the nation's
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largest natural gas storage systems
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about ten thousand four hundred miles of
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natural gas transmission gathering and
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storage pipelines and a liquefied
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natural gas terminal finally generating
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46 percent of overall revenue the
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Dominion energy Virginia segment is by
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far the largest out of the five this
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segment operates a vertically integrated
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electric utility in Virginia and
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Northeast North Carolina it currently
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serves 2.6 million customer
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Dominion is fairly diverse in terms of
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revenue and relatively spread out this
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gives potential investors some peace of
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mind in terms of revenue stability over
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the long run now let's see how the
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company fare in the dot-com bubble crash
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great financial recession and House
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currently training in the downturn in
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2020 Dominion fell forty nine point four
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seven percent during the dot-com bubble
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crash just under 1% less than the S&P is
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fifty point four one percent decline
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with Dominion barely performing better
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than the S&P here when looking at the
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great financial crisis Dominion fell
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forty five point zero seven percent
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about twelve percent less than the 57.61
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percent declined by the S&P Dominion
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with a much stronger performance during
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this recession check marks for Dominion
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again during the downturn in twenty
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twenty Dominion fell thirty six point
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four three percent compared to the S&P
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is thirty five point five nine percent
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decline Dominion underperforming by just
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a hair in this downturn that being said
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from these three instances we can infer
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that utility companies like Dominion
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will more than likely perform slightly
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better or a bit worse in the overall
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market the losses though will be heavily
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mitigated when taking into account the
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dividends that come with Dominion the
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defensive nature of the utility sector
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shining brightly during recessions
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headquartered in Richmond Virginia with
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around twenty one thousand full-time
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employees Dominion energy is currently
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led by longtime CEO of Thomas F Farrell
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the second having been at the helm since
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January of 2006 Farrell currently leads
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an upper management team of twenty two
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people the majority of the 22 member
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team have been with Dominion for a large
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part of their careers as well as some
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newer additions within the last few
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years when looking at the performance of
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the stock since Farrell took over on
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January 1st 2006 we can see a
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respectable 121 point eight three
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percent increase in that timeframe once
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again it is worth mentioning that this
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does not include dividends with
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dividends added the actual rate of
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return will be much higher taking a
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quick look at the institution's
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currently holding Dominion we can see
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capital research at fifth place with a
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3.5 5% stake barely edging them out for
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fourth is Wellington management with a
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three point six 5% stake with almost a
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two percent higher state
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eight Street which is quickly becoming a
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staple among the top five is a third
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with a 5.4 percent stake in the company
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the institution and second place is as
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expected
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Blackrock with a 7.2 percent stake and
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last but not least Vanguard with a
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whopping 8.4 one percent stake in
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dominions their assets in the company
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equalling nearly five billion dollars
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due to the high regulatory nature of
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utilities it is important for Dominion
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to maintain good relationships with
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regulatory bodies and policies if
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anything goes wrong here it will more
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than likely impact the stock price the
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type of commodities that are used to
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generate the electricity could also hurt
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the company if prices were to suddenly
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surge upwards another major risk is
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drastic underperformance against the
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overall market in the case of an
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extended bull market as utilities are
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more defensive in nature
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people might shift their focus to more
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growth heavy stocks during such times
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lastly high interest rates with Dominion
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and other utilities having a high dead
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load as is their nature high interest
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rates will likely hurt the company in
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financing new debt in my opinion
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Dominion energy is a company in which
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you can invest confidently they have an
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excellent track record over the years of
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stock performance dividend payments and
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solid dividend growth even with the more
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defensive nature of investing in a
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utility company it should be noted that
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Dominion did in fact beat the S&P 500
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over the last 20 years and has continued
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to pay out a strong above average
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dividend throughout the same time period
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though there are some risks involved
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with investing utilities it is no doubt
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a more risk-averse investment overall
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thank you for watching guys I hope you
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found that video helpful if you made it
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thus far please hit that subscribe
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button it really helps out the channel
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till next time
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stock ninja oh I am NOT a financial
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advisor in this video is for educational
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purposes only
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please do your own research before
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buying or selling any stock seen in this
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video thank you
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