| | | Hi Paul, it’s always good to hear alternate viewpoints, and question ones analysis. My (fairly recent) purchase in D came on the basis of the company’s own recent forecast for 10% div increases through 2020, along with supporting analysis from M*, SSD and Wells Farg*. I have no particular expertise in utilities (and maybe others who do here can chime in) but I’ll copy a brief sampling of the notes I’ve kept in recent months that led to my purchase. (Edit, I see Jim has chimed in while I wrote this, thanks). Thank you for taking the time to post, an open discussion is always healthy.
Good investing to all.
Dominion is in the final stages of commissioning its first natural gas export terminal in Virginia. They have 20-year contracts in place with partners in Japan and India for American-sourced gas.
M*: The key takeaway was our increased confidence that wide-moat businesses would generate approximately 50% of operating earnings by 2021 and dropdowns to Dominion Energy Midstream Partners, or DM, will generate sufficient cash flow to allow 10% common dividend increases over the next five years.
To make its growth projections a reality, Dominion has multiple projects currently approved or under construction. These include its massive 1,588-megawatt gas-fired combined-cycle power plant located in Greensville County, Virginia which will be the largest and most efficient natural gas plant in the country.
Management is investing heavily in natural gas, including massive projects such as the Cove Point LNG export terminal and the Atlantic Coast Pipeline. These projects are expected to generate substantial cash flow (backed by long-term contracts with customers) as they come online over the next few years.
The market also underappreciates what we believe are near-certain 10% annual dividend increases and moatworthy growth opportunities driving high-single-digit EPS growth. |
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